101st Congress
1st Session
SENATE
Report
101-216
FINAL REPORT AND LEGISLATIVE
RECOMMENDATIONS
A REPORT
OF THE
SPECIAL COMMITTEE ON INVESTIGATIONS
OF THE
SELECT COMMITTEE ON INDIAN AFFAIRS
UNITED STATES SENATE
November 20 (legislative day, November 6), 1989.— Ordered to be printed
24-087
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON '. 1989
UNITED STATES SENATE
SPECIAL COMMITTEE ON INVESTIGATIONS OF THE SELECT COMMITTEE
ON INDIAN AFFAIRS
SENATOR DENNIS DeCONCINI, Arizona, Chairman
SENATOR JOHN McCAIN, Arizona, CthChairman
SENATOR THOMAS A. DASCHLE, South Dakota
Kenneth M. Ballcn, Chief Counsel
(n>
UNITED STATES SENATE
SPECIAL COMMITTEE ON INVESTIGATIONS OF THE SELECT COMMITTEE
ON INDIAN AFFAIRS
Committee Staff and Consultants
Michael J. Anderson
Kenneth M. Ballen
John Brandolino
Scott Celley
Richard A. Cocozza
Denise DeForest
Gretchen E. DeMar
William V. Elliott
Richard James Elroy
Geoffrey L. Ferlan
Randall H. Fetterolf
Mary Ellen Fleck
Greg B. Gilham
Sam Hirsch
Littie M. Hooker
Frederick E. Hoxie
Andrew D. Klingenstein
Carolyn F. Lambka
Kathleen G. Lively
Anthony Marceca
Nathan A. Marceca
Fred M. Merritt
George Brent Mickum rV
Kathryn A. Momot
Charles H. Norman
Steven A. Pollock
Percy M. Samuel
Sharon Scott
Mary Lou Soller
Joseph Sedwick Sollers III
Eugene P. Twardowicz
(HI)
LETTER OF TRANSMITTAL
U.S. Senate,
Special Committee on Investigations,
Washington, DC, November, 1989.
Hon. Robert C. Byrd,
President Pro Tempore,
U.S. Senate, Washington, DC.
Hon. Daniel K. Inouye,
Chairman, Select Committee on Indian Affairs,
U.S. Senate, Washington, DC.
Dear Mr. President and Mr. Chairman: After almost two years
of investigation and hearings, we are pleased to transmit our unan-
imous, bipartisan Final Report and Legislative Recommendations.
Part One of the Report is the Executive Summary, which sum-
marizes our principal findings, conclusions and recommendations.
Part Two is a history of past Congressional investigations of Ameri-
can Indian affairs. Part Three constitutes a narrative of our major
findings. The Report concludes with Legislative Recommendations
and two appendices.
Respectfully submitted,
Dennis DeConcini,
Chairman.
John McCain,
Co-Chairman.
Thomas A. Daschle,
Member.
(V)
CONTENTS
Page
Letter of Transmittal v
Contents vn
PART ONE
Executive Summary: A New Federalism for American Indi-
ans »
PART TWO
A Brief History of Congressional Investigations and Ameri-
can Indian Affairs from 1789 to 1989 27
PART THREE
Findings:
Chapter 1: Economic Development and Indian Prefer-
ence Contracting 69
Chapter 2: Child Sexual Abuse in Federal Schools 89
Chapter 3: The Federal Government and American
Indian Natural Resources 105
Chapter 4: The Indian Health Service 153
Chapter 5: Indian Housing 169
Chapter 6: Corruption Among Tribal Governmental Of-
ficials 181
PART FOUR
Legislative Recommendations 213
APPENDIXES
A: Organization and Conduct of the Special Committee on
Investigations ; 225
B: Reports of Congressional Investigations of American
Indian Affairs, 1792 to 1989 236
(VII)
101st Congress 1 __.._, f Report
1st Session SENATE 101-216
FINAL REPORT AND LEGISLATIVE RECOMMENDATIONS
A NEW FEDERALISM FOR AMERICAN INDIANS
November 20 (legislative day, November 6, 1989.— Ordered to be printed
Mr. DeConcini, from the Special Committee on Investigations of
the Select Committee on Indian Affairs, submitted the following
REPORT
PART ONE
THE EXECUTIVE SUMMARY:
A NEW FEDERALISM FOR AMERICAN INDIANS
This year we celebrate the 200th anniversary of
George Washington's inauguration as the first Presi-
dent of the United States. We also celebrate the bicen-
tennial of our first treaty under the Constitution with
American Indian tribes. These two events are not coin-
cidental. At the birth of our constitutional democracy,
our Founding Fathers chose to recognize the original in-
habitants of America as independent, self-governing na-
tions which long predated European settlement. In call-
ing for agreements by treaty with Indians, President
Washington and the founders pledged that the United
States would deal with the continent's native people
with consistency, fairness and honor.
In the century following 1789, however, frontier set-
tlement unleashed economic and political forces that
undermined Washington's call for stability and mutual
respect in Indian affairs. Hounded by Western expan-
sionists, and thrown on the defensive by the outspoken
enemies of American Indians, Congress abandoned the
Founding Fathers' commitment to fair and honorable
agreements with Indian peoples. Throughout the 19th
century, the federal government conducted brutal wars
to subjugate resistant tribes. The military campaigns
often led to conquest and forced removal of Indians
from their native territory.
In exchange for the vast lands that now comprise
most of the United States, the federal government
promised the tribes permanent, self-governing reserva-
tions, along with federal goods and services. Instead,
government administrators, many of whom were cor-
rupt, tried to substitute federal power for the Indians'
own institutions by imposing changes in every aspect of
native life. At its height, there seemed no limit to the
government's paternalistic ambitions. It severed ties be-
es)
tween parents and children by confining students in
government boarding schools; it shattered the authority
of religious leaders by prohibiting traditional rituals
and jailing those who resisted; and it destroyed indige-
nous economies by seizing tribal territories and reneg-
ing on the promises it made for land, federal support
and financial assistance. Finally, while the government
offered Indians equal membership in the United States,
it failed to grant them the basic freedom enjoyed by all
other Americans: the right to choose their own form of
government and live free from tyranny. *
Only in the last two decades have federal policymak-
ers taken some cautious steps toward renewing Indian
self-rule. Pressed by a persistent and articulate Ameri-
can Indian leadership, as well as other concerned citi-
zens, Congress has begun to return governmental au-
thority to the tribes. Yet even as we near the end of the
20th century, American Indians remain largely trapped
by 19th century poverty: 16 percent of reservation
homes lack electricity, 21 percent an indoor toilet and
56 percent a telephone. And for the most part, federal
policymakers and administrators are still held captive
by the ghosts of paternalism and dependency. 2
Now is the time, on the 200th anniversary of both our
constitutional democracy and its first Indian treaty, to
reject the errors of our history and return to the high
standards set by President Washington. Now is the time
to embark on a new era of negotiated agreements be-
tween Indian tribes and the United States that abolish
federal paternalism but ensure full federal support. By
launching a New Federalism for American Indians, we
will reaffirm our faith in the extraordinary vision of
those who created this unique Republic, while redeem-
ing the promise made long ago to its first people.
I. The Principal Findings of the Special Committee
on Investigations 3
a. an overview
When the United States Senate established the Spe-
cial Committee on Investigations nearly two years ago,
we were asked to uncover fraud, corruption and mis-
management in American Indian affairs, no matter
where or to whom it led. We indeed found fraud, cor-
ruption and mismanagement pervading the institutions
that are supposed to serve American Indians.
But we were led to ask a larger question: Why is this
pattern of abuse endemic? After two years of investiga-
tion, the answer is clear: Because Congress has never
fully rejected the paternalism of the 19th century, the
U.S. government maintains a stifling bureaucratic pres-
ence in Indian country, and fails to deal with tribal gov-
ernments as responsible partners in our federalist
system.
The Federal Agencies
Paternalistic federal control over American Indians
has created a federal bureaucracy ensnarled in red tape
and riddled with fraud, mismanagement and waste.
Worse, the Committee found that federal officials in
every agency knew of the abuses but did little or noth-
ing to stop them.
Federal agencies knew, for example, that hundreds of
millions spent on the government's program to promote
Indian economic development were largely drained by
shell companies posing as legitimate Indian-owned
firms. The Bureau of Indian Affairs (BIA) did not need
the Committee to discover that 19 of the largest so-
called Indian companies that garnered federal contracts
were frauds: a BIA Division Chief warned his superiors
in an internal memo over a year before the Committee's
hearings that the entire program was a "massive fraud
[and] financial scandal." Yet, in 31 years, the BIA only
discovered two minor instances of possible fraud. 4
In federally-run schools for Indians, BIA officials
knew that school administrators had hired teachers
with prior offenses for child molestation. Moreover, BIA
knew its employees had failed to report or investigate
repeated allegations of sexual abuse by teachers, in one
case for 14 years. Yet BIA promoted negligent school
administrators and, unlike all 50 states, never fully
adopted a system that required employees to report and
investigate child abuse. 5
Federal agencies responsible for protecting natural re-
sources also neglected known problems. For instance,
federal officials in Oklahoma admitted that Indian land
was "wide open" to oil theft, yet for the past three
years they uncovered none. They even ignored specific
allegations against the nation's largest purchaser of
Indian oil, which Committee investigators later caught
repeatedly stealing from Indians. 6
The federal budget for Indian programs equals $3.3
billion annually. Yet surprisingly little of these funds
reach the Indian people. In fact, the total household
income for American Indians from all sources, including
the federal government, is actually less than the entire
federal budget of $3.3 billion. 7
Not only do American Indians suffer from this ex-
treme waste. Year after year, all American taxpayers
must foot the bill for a negligent and unresponsive bu-
reaucracy from a limited federal budget.
When the Executive Branch fails to detect problems
or lacks the resources to address them, it is the respon-
sibility of Congress to assist. When, however, federal
agencies themselves are aware of problems but refuse to
act, Congress must question their very existence.
Indian Tribal Governments 8
In the last two decades, Indian tribal governments
have acquired increased federal resources and statutory
powers. Even with limited empowerment, tribes have
established innovative programs that are tribally con-
ceived and directed — and greatly benefit the tribal
members themselves. 9 At the same time, however, fed-
eral funds and authority have been conferred on tribal
entities without effective federal sanctions and enforce-
ment against corruption. Free from tough criminal laws
and energetic prosecution, some tribal officials have en-
gaged in corrupt practices.
Chairman Peter MacDonald of the Navajo Nation is
one example of a tribal chief executive who placed per-
sonal enrichment above public service. For years, Mac-
Donald received bogus "consulting fees," "loans" and
"gifts" — and even persuaded the tribe to purchase
desert land worth less than $26 million for more than
$33 million so that, through a shell company, he could
enjoy a secret share of the $7 million markup.
Tribal officials on other Indian reservations also bla-
tantly sought improper payments. Still others, free from
even the most basic federal conflict of interest laws,
used their official positions to openly award tribal con-
tracts to their own businesses.
The Congress
Since Congress has ultimate responsibility for federal
Indian policy, we in the Senate and House must accept
the blame for failing to adequately oversee and reform
Indian affairs. Rather than becoming actively engaged
in Indian issues, Congress has demonstrated an attitude
of benign neglect. On the one hand, by allowing tribal
officials to handle hundreds of millions in federal funds
without stringent criminal laws or adequate enforce-
ment, Congress has left the American Indian people
vulnerable to corruption. On the other hand, for years
Congress has tolerated the clear administrative break-
down of federal agencies, at the same time refusing to
deal with tribes themselves as responsible governments.
It is a fundamental tenet of American federalism that
local governments have the responsibility to manage
their own affairs, unencumbered by inappropriate feder-
al restrictions but accountable for the funds they re-
ceive. Yet Congress has not only neglected to hold cor-
rupt tribal officials accountable, it has instead imposed
a stifling and largely duplicative layer of federal bu-
reaucracy over all tribal governments. While paying lip
service to the idea of Indian self-determination, Con-
gress has permitted entrenched federal agencies to
micro-manage tribal affairs, deluging struggling Indian
governments with red tape and meaningless procedures.
Most significant, by constructing a double layer of
federal and tribal governments over Indian communi-
ties, Congress has created a political no-man's land,
where responsibility fluidly shifts from one entity to an-
other. Tribal officials can easily blame the federal bu-
reaucracy for their own failings, while federal officials
are quick to defend their position by pointing to the
weaknesses of tribal governments. Yet among the often
justified recriminations, American Indians themselves
can hold no one to task. If no one is responsible, then no
one is accountable. And the American Indian citizen
suffers the consequences.
B. THE FEDERAL AGENCIES
Economic Development, Social Services and Other Pro-
grams 10
The Bureau of Indian Affairs is the principal govern-
ment agency responsible for Indian affairs. A branch of
8
the Department of the Interior, the BIA's responsibil-
ities extend into nearly all realms of Indian life, from
economic development and construction to education
and social services. In every area it touches, the BIA is
plagued by mismanagement. That is not to say that the
Committee did not encounter many hard-working and
talented individuals at BIA. Rather, the inability of so
many good people to have a real impact only under-
scores the terminal sickness of the institution itself.
Promoting Indian economic development is one of the
principal missions of the BIA. Forty-five percent of all
reservation Indians live below the poverty line, almost
half of all Indian adults are unemployed, and the major-
ity of those who do work earn less than $7,000 per
year. 1 l
To encourage Indian economic development, since
1910 Congress has mandated preference for Indian busi-
nesses in letting federal contracts from funds appropri-
ated for the benefit of Indians. Though the statute was
passed in 1910, final regulations have never been issued.
Indeed, the entire program of Indian preference con-
tracting is a massive fraud on American Indians.
Indian-owned or -controlled businesses do not receive
preference; routinely the contracts are awarded to
phony Indian shell or front companies controlled by
non-Indian businessmen and created solely to obtain
federal funds. Over the years, the federal government
has spent hundreds of millions of dollars on a program
that is worse than useless because it actively deceives
the Indian people. It asserts that a worthwhile program
of economic development is in progress, when in reality
only those willing to defraud the government are being
enriched by the federal purse.
BIA, however, was not surprised by the waste and
fraud. The Special Committee discovered that more
than one year before its public hearings, a BIA Division
Chief had already alerted his superiors that "our pro-
gram, nationwide, is open to the possibility of massive
fraud." His internal memo even warned that "no
action" by the BIA "will almost certainly result in a fi-
nancial scandal which will call into question the ability
of BIA to manage this program." Yet the Bureau made
little effort to avert this "massive fraud" and "financial
scandal."
9
Significant resources were not required to address the
problem. In just eight months, the Special Committee,
with a limited staff and budget, uncovered 19 major
fronting relationships which dominated the market. By
contrast, the BLA admitted that in 31 years it has ex-
posed only two minor examples of possible fraud, while
consistently awarding contracts to companies the Com-
mittee later proved were fraudulent.
BIA's failure to police Indian preference was not
unique. The Department of Housing and Urban Devel-
opment (HUD), the Indian Health Service (IHS) of the
Department of Health and Human Services, and the
Small Business Administration were all equally remiss.
HUD, for example, admitted to the Committee that it
has never decertified a single fraudulent company.
The Committee found that BIA also permitted a pat-
tern of child abuse by its teachers to fester throughout
BIA schools nationwide. For almost 15 years, while
child abuse reporting standards were being adopted by
all 50 states, the Bureau failed to issue any reporting
guidelines for its own teachers. Incredibly, the BIA did
not require even a minimal background check into po-
tential school employees. As a result, BIA employed
teachers who actually admitted past child molestation,
including at least one Arizona teacher who explicitly
listed a prior criminal offense for child abuse on his em-
ployment form.
At a Cherokee Reservation elementary school in
North Carolina, the BIA employed Paul Price, another
confessed child molester— even after his previous princi-
pal, who had fired him for molesting seventh grade
boys, warned BIA officials that Price was an admitted
pedophile. Shocked to learn several years later from
teachers at the Cherokee school that Price continued to
teach despite the warning, Price's former principal told
several Cherokee teachers of Price's pedophilia and no-
tified the highest BIA official at Cherokee. Instead of
dismissing Price or conducting an inquiry, BIA adminis-
trators lectured an assembly of Cherokee teachers on
the unforeseen consequences of slander.
The Committee found that during his 14 years at
Cherokee, Price molested at least 25 students, while
BIA continued to ignore repeated allegations— including
an eyewitness account by a teacher's aide. Even after
Price was finally caught and the negligence of BIA su-
10
pervisors came to light, not a single official was ever
disciplined for tolerating the abuse of countless students
for 14 years. Indeed, the negligent Cherokee principal
who received the eyewitness report was actually pro-
moted to the BIA Central Office in Washington— the
same office which, despite the Price case, failed for
years to institute background checks for potential teach-
ers or reporting requirements for instances of suspected
abuse. Another BIA Cherokee school official was pro-
moted to the Hopi Reservation in Arizona, without any
inquiry into his handling of the Price fiasco.
Meanwhile at Hopi, a distraught mother reported to
the local BIA principal a possible instance of child
sexual abuse by the remedial reading teacher, John
Boone. Even though five years earlier the principal had
received police reports of alleged child sexual abuse by
Boone, the principal failed to investigate the mother's
report or contact law enforcement authorities. He
simply notified his superior, who also took no action. A
year later, the same mother eventually reported the
teacher to the FBI, which found that he had abused 142
Hopi children, most during the years of BIA's neglect.
Again, no discipline or censure of school officials fol-
lowed: the BIA simply provided the abused children
with one counselor who compounded their distress by
intimately interviewing them for a book he wished to
write on the case.
Sadly, these wrongs were not isolated incidents.
While in the past year the Bureau has finally promul-
gated some internal child abuse reporting guidelines, it
has taken the Special Committee's public hearings for
the BIA to fully acknowledge its failure.
BIA's mismanagement is manifest in almost every
area the Committee examined. Although the conse-
quences are far less severe than those suffered by inno-
cent children, in road construction, facilities manage-
ment, procurement, loan programs, financial manage-
ment of Indian trust funds, computer services and
realty management, among others, the Committee
found a pattern of callously ignoring known problems,
defending and promoting incompetent staff, and ostra-
cizing the few capable employees who dared to speak
out against the institutional incompetence that sur-
rounded them.
11
Natural Resources 12
BIA is equally ineffective in its mandated role of pro-
tecting Indian natural resources. In 1970 the United
States Supreme Court ruled that three of the four larg-
est tribes in Oklahoma owned the resource-rich, 96-mile
Arkansas Riverbed. But there was a catch to the tribes'
good fortune: the BIA had to order surveys of the river-
bed to properly apportion the land. Nineteen years later
the BIA has managed to initiate surveys of only 789 of
the 22,000 riverbed acres. Meanwhile, the three tribes
may have lost close to $100 million in revenues from
the failure to develop their riverbed natural resources.
Nearby in Oklahoma, another tribe has lost its chance
to have safe drinking water. The BIA allowed oil com-
panies to irreparably pollute the tribe's groundwater,
and despite the tribe's insistent pleas, the agency has
failed for some 12 years to initiate the necessary litiga-
tion for damages or afford any relief.
Elsewhere in Oklahoma, individual Indian allottee
owners of crude oil and natural gas have also been left
in limbo. Since 1983 federal law has required that the
Department of the Interior distribute royalty income
from oil and gas production to all allottees, along with a
comprehensible explanation of their royalty payments.
Yet the BIA has created an "Explanation Of Payment
Form" that many of its own employees confessed they
cannot explain. Even the Director of an Interior agency
with partial responsibility for royalties admitted to the
Committee that he cannot understand the BIA form.
Moreover, these incomprehensible forms often have
tragic consequences for allottees who depend on their
royalty checks. One allottee's form indicated that she
received payments and owned royalty interests, which
precluded her from obtaining state welfare. Yet for
three years, this disabled mother of three never re-
ceived proper or consistent royalty checks. Ineligible for
state aid and without her royalty income, she could not
support her children, and was forced to put them up for
adoption and live by herself in an abandoned house.
The Interior Department's Bureau of Land Manage-
ment (BLM) is charged with detecting and preventing
the theft of oil and gas on Indian lands. Since 1981 in
Oklahoma alone, BLM has assigned at least nine ex-
perts to inspect Indian wells and report possible inci-
12
dents of theft. Yet these experts admitted to the Com-
mittee that they spent 75 percent of their time in their
offices, not working in the field where theft could be de-
tected. They simply waited for some companies to
report insignificant instances of theft — for a total of
nine thefts of $20,490 in nine years. At that, they con-
fessed that they did not even properly report these
thefts to law enforcement authorities.
While these officials were waiting for the phone to
ring, Koch Oil, the largest purchaser of Indian oil in the
country, was engaged in a widespread and sophisticated
scheme to steal crude oil from Indians and others
through fraudulent mismeasuring and reporting. The
Committee sent its investigators into the field to con-
duct covert surveillance and caught Koch stealing from
Indians on six separate occasions. By further investiga-
tion, the Committee determined that Koch was engaged
in systematic theft, stealing millions in Oklahoma
alone.
Faced with such grand larceny, the Committee asked
BLM: Why weren't your experts in the field, like ours?
Why didn't they pursue a specific complaint they had
already received against Koch? Why did they even fail
to report and pursue the pitifully low incidence of theft
they compiled? While BLM Oklahoma officials acknowl-
edged that Indian land was "wide open" to massive oil
theft such as the Committee uncovered, they admittedly
did nothing to detect it. When asked why they even
failed to report the meager theft logged, one supervisor
offered that he "didn't have the proper telephone
number" for the FBI.
Incredibly, the official in charge of BLM's national
anti-theft program defended the Oklahoma office's con-
duct. Reflecting the bureaucratic insensitivity Native
Americans are forced to deal with almost every day, he
proclaimed that BLM was fulfilling its responsibility to
American Indians "appropriately and adequately."
Health and Housing
The federal government's failures, unfortunately, are
not limited to the Department of the Interior and its
agencies. The Indian Health Service, an agency of the
Department of Health and Human Services, is also
hampered by mismanagement. IHS senior executives
authorized improper contracts to pay for business meet-
13
ings at luxury resorts. In Albuquerque, for example,
$70,000 in federal funds were diverted from a juvenile
alcohol abuse prevention program to finance a fitness
retreat for IHS managers. Yet soon after a newly-
created internal Office of Program Integrity and Ethics
documented a few of these abuses, top IHS management
stripped its Director of his powers and the internal re-
views ceased. 13
While the Department of Housing and Urban Devel-
opment spends more than $200 million per year on res-
ervation housing, it largely entrusts the day-to-day oper-
ation of its program to tribal Indian Housing Authori-
ties (IHA's). As is often the case in Indian country, re-
sponsibility rests with neither party and the results can
be maddening. For example, a 150-unit development in
Arizona was reviewed more than 30 times by inspectors
for both HUD and the local IHA. At one point the HUD
reviewer noted that construction was 35 percent com-
plete. The following week, the IHA inspector declared
the project only 25 percent complete and one month
later, the same HUD reviewer stated it was 30 percent
complete. Given such confusion, it is not surprising that
less than seven months after the project was "complet-
ed," its streets were severely deteriorated, houses were
built in the wrong location, and water was seeping
through the walls of the units. 14
C. INDIAN TRIBAL GOVERNMENTS 15
There are currently about one million Native Ameri-
cans living on or near Indian lands. The Navajo Nation,
the largest Indian tribe in the United States, comprises
more than one-fifth of that total and proudly inhabits a
land three times the size of Massachusetts. The Nava-
jos' tribal government is larger and their natural re-
source base more imposing than any other Indian tribe.
Without question, the leading Navajo politician of the
modern era is Peter MacDonald. MacDonald has been
in command as Chairman for all but four of the past 19
years. Yet unbeknownst to the people he served, Peter
MacDonald ran the Navajo tribal government like a
racketeering enterprise.
Chairman MacDonald trumpeted an exciting vision of
economic development for the destitute Navajo Nation.
By attracting private industry to the reservation, he
14
claimed, jobs would be created to lift the Navajos — 47
percent of whom were jobless — out of poverty.
"The Navajo Nation is one of America's last economic
frontiers/' MacDonald declared in 1987. "I see a wealth
of opportunity for all of us," he went on to promise.
"Let us, once and for all, share in the bounty of Amer-
ica!"
Little did the Navajos know that the wealth of oppor-
tunity waiting for their nation was in large part des-
tined for Peter MacDonald personally. The Chairman
devised a scheme where private enterprises attracted to
the reservation had to ' share the bounty of America"
with MacDonald himself. Sham "consulting contracts"
ostensibly with his son, bogus "loans," and simple de-
mands for cash and gifts were among the extortionate
practices MacDonald employed. But no matter what
form the extortion, the unambiguous price of doing
business on the Navajo Reservation was a kickback to
the Chairman of the tribe.
Not content with milking kickbacks from outside
businesses and squandering the economic development
he so eloquently advocated, MacDonald took funds di-
rectly from the Navajo government treasury to pay for
his regal trappings and lifestyle. Although 46 percent of
Navajos had no electricity, 54 percent lacked indoor
plumbing and 79 percent lived without a telephone,
MacDonald used tribal funds to pay for private luxury
airplane flights for personal trips and his own remod-
eled executive suite with mahogany and gold-plated fix-
tures. Together with his friend Bud Brown, MacDonald
also conceived a scheme where a shell corporation
would buy desert real estate on the open market and
then sell it to the unsuspecting Navajo Nation after a
substantial markup. Although the nearly 500,000 desert
acres MacDonald selected for the "land flip" could have
been purchased for less than $26 million, the Navajo
Nation paid more than $33 million so MacDonald could
comfortably enjoy a secret share of the ill-gotten profit.
As the costs of his corruption began to weigh on the
tribe, MacDonald shifted blame to the BIA. Because of
the blur of responsibilities, MacDonald could plausibly
maintain that Navajo prosperity was subverted simply
by the overbearing presence of the BIA, or as MacDon-
ald dubbed it, "JBoss /ndians Around." And, disturbing-
ly, many of MacDonald's wrongdoings fell between the
15
cracks in existing federal law, which may make his
criminal prosecution extremely difficult.
MacDonald's conduct is not unique. While consistent-
ly targeting the BIA as an easily available scapegoat,
some tribal officials throughout the country have profit-
ed at the expense of their people by exploiting current
gaps in the criminal code. Like MacDonald, they have
frequently sought bogus loans, free in-kind services and
"consulting contracts" as the everyday currency of un-
checked greed, yet their actions do not constitute the
unequivocal bribes now required by federal law for full
prosecution.
Similarly, tribal officials can practice the most trans-
parent conflicts of interest without fear of sanction. One
Midwestern tribal chairman even boasted that funnel-
ing tribal contracts to his own business only served to
assure him that the tribe was getting the very best
deal— never mind that, if subject to competition, the
price for the services offered would have been consider-
ably lower. In reality, the only deal was for this tribal
chairman himself, who legally profited more than
$600,000 on the backs of the people he supposedly
served.
II. Principal Recommendations of the Special
Committee on Investigations
We must put a stop to the monopolistic greed
and commercial tyranny which has character-
ized the acts of certain oil companies on Indian
land in Oklahoma, whose conduct in shameful-
ly disregarding the rules and regulations of the
Department of the Interior has cost both the
Indian lessor and the independent operator mil-
lions of dollars.
Those words are not ours. The Secretary of the Interi-
or wrote them in a letter to President Theodore Roose-
velt in 1907. That they so uncannily mirror our findings
testifies to the repeated failure of the federal govern-
ment to serve American Indians. At least 42 congres-
sional investigations have recommended federal reorga-
nization, restructuring, re-tinkering. And in one nine-
year period alone, the BIA was actually reorganized ten
times. 16
16
The time for tinkering is over. The time for bold lead-
ership is now. Working together with tribal officials on
a government-to-government basis, we must create a
blueprint for a New Federalism for American Indians.
The time has come for a federal policy that, by negotiat-
ed agreements with tribes, abolishes paternalism and,
while providing the requisite federal funds, allows tribal
governments to stand free — independent, responsible
and accountable.
A. A NEW ERA OF AGREEMENTS 1 7
Legal agreements between the United States and
tribal governments have a unique place in our history.
Predating the Constitution, both the Continental Con-
gress and the first American Congress under the Arti-
cles of Confederation chose to recognize Indian govern-
ments through agreements by treaty. Significantly, the
Constitution itself explicitly incorporated the continuing
legitimacy of those obligations. Again, at the beginning
of the Republic, President Washington and the Congress
chose treaties as the basis for federal relations with
Indian nations. President Washington believed that
only through legal agreement could the young Repub-
lic's relationship with tribes be governed by "fixed and
stable principles." To act on any other basis, Secretary
Knox wrote to the President in 1789, "would be a gross
violation of the fundamental laws of nature, and of that
distributive justice which is the glory of a nation."
In 1871 Congress abolished treaties as the legal form
for relations with Indians. A "treaty" by Constitutional
definition is simply an agreement by the President
made "by and with the Advice and Consent of the
Senate." The 1871 abolition of treatymaking "resulted
from the opposition of the House of Representatives to
its practical exclusion from any policy role in Indian af-
fairs." 18
As the Supreme Court repeatedly held, this meant
simply that after 1871 the President and Indians could
negotiate "agreements" which are the legal equivalent
of treaties in all respects save one: treaties must be ap-
proved by two-thirds of the Senate while agreements re-
quire implementing legislation by a majority of both
Houses of Congress. Between 1871 and 1909 the United
States and Indian tribes entered into 56 agreements ap-
17
proved by both Houses of Congress and with exactly the
same force and effect as treaties. Indeed, the Supreme
Court has ruled that the provisions of such agreements
"like treaties [are] the supreme law of the land," and
has declared that these treaties and agreements "prom-
ise more and give the word of the Nation for more." * 9
We must promise the word of our nation once again
by entering into new agreements that both allow Amer-
ican Indians to run their own affairs and pledge perma-
nent federal support for tribal governments. Only by en-
shrining in formal agreements the federal government's
most profound promise will we finally bury the discred-
ited policies of forced tribal termination and Indian as-
similation deep in their deserved graves.
New agreements will, of course, be completely volun-
tary and not affect any rights or obligations a tribe may
have due to treaties, former agreements, or existing
claims against the United States. Nor would new agree-
ments alter in any fashion the current legal status of
tribal governments or their jurisdiction vis-a-vis the
states. Rather, tribes which choose new agreements will
finally be allowed to assume responsibility for their own
affairs.
The empowerment of tribal self-governance through
formal, voluntary agreements must rest on mutual ac-
ceptance of four indispensable conditions:
1. The federal government must relinquish its
current paternalistic controls over tribal affairs; in
turn, the tribes must assume the full responsibil-
ities of self-government;
2. Federal assets and annual appropriations must
be transferred in toto to the tribes;
3. Formal agreements must be negotiated by
tribal governments with written constitutions that
have been democratically approved by each tribe;
and
4. Tribal governmental officials must be held
fully accountable and subject to fundamental feder-
al laws against corruption.
From Federal Paternalism to Tribal Responsibility
Every agreement will recognize each tribe's perma-
nent right to exercise self-government, including its
right to determine its own form of government, mem-
bership, legislative prerogatives and judicial system.
18
Under new agreements, the federal government will re-
linquish its existing paternalistic powers to review and
approve or disapprove tribal constitutions, constitution-
al amendments, bylaws, legal codes, resolutions, ordi-
nances, contracts, leases, and other transactions entered
into by tribes. As a consequence, the tribal governing
body will finally assume full authority. The federal gov-
ernment's legal responsibilities will become tribal re-
sponsibilities. 20
New agreements will give each tribal government the
freedom to assess its own communities' needs, set prior-
ities, and design budgets to address those priorities.
Indian governments will be empowered to manage their
internal affairs in the same sense as state governments,
affording them, at last, the benefits of American feder-
alism.
The range of options available to a tribal government
will be almost limitless: it can invest in schools, medical
clinics, law enforcement, or physical infrastructure; it
can promote individual Indian entrepreneurship, tribal
businesses, orjninerals^xtraction; it can purchase land
on the openliiarket; or it can hire management consult-
ants and other experts to improve the administration of
tribal agencies. Regardless of the outcomes, all key deci-
sions will be made by Indian communities and their
elected leaders, not by distant Senators, Congressmen or
federal bureaucrats.
Tribal Responsibility Means Full Federal Transfer
All federal resources, functions and programs, fuliy-
funded, as well as the physical assets and land of BlA,
IHS and the other federal agencies, must be transferred
in toto to the tribes entering new agreements. 21 Specifi-
cally, the federal government will agree to provide each
tribe with an annual Tribal Self-Governance Grant
(TSGG), equalling its fair share of the current federal
Indian budget. In order to depoliticize the federal
Indian budget process, the size of the grants should be
strictly proportional to population. 22 Moreover, to fur-
ther local decision-making, every TSGG must be provid-
ed without program restrictions or categories. Most im-
portant, to protect tribal budgets from being eaten away
by inflation or the fiscal pressures faced by Congress,
the United States will pledge that a tribe's Self-Govern-
19
ance Grant shall be a permanent entitlement with an
annual cost-of-living allowance.
Signing a new agreement will allow a tribe to exit the
current federal bureaucracy and receive a grant from
its share of the $3 billion worth of current federal pro-
grams specifically targeted to Indian populations, such
as the BIA, IHS and HUD's Office of Indian Housing.
Of course, new agreements will have no affect on Indi-
ans' eligibility for state and local programs, or for feder-
al funds which they receive on some basis other than
their status as Indians, such as Social Security, food
stamps, Aid to Families with Dependent Children, and
various grants for which tribes compete with states,
counties and municipalities. 23
The TSGG's that tribes receive under their new
agreements will be remarkably large— more than offset-
ting current federal services. For example, a tribe of
200,000 members (i.e., the Navajo Nation) will receive
approximately $600 million annually, a tribe of 5,000
members will get about $15 million per year, and even a
small tribe of 350 members will receive more than a
million dollars in its annual grant. These grants will
not increase the federal budget at all. But they could
help to reverse the stagnating welfare economies of
many Indian reservations. Under the New Federalism
for American Indians, government funds that are now
drained by fraud, corruption, and duplicative layers of
bureaucracy will be targeted directly to the Indian
people who for so long they have failed to reach.
Tribal Responsibility Means Constitutional Government
As all 50 states are governed by written constitutions,
fundamental principles of American federalism require
that tribes democratically adopt written constitutions as
well. By signing an agreement with the United States,
the tribe will promise to operate in accordance with a
written constitution that can be amended only by proce-
dures explicitly set forth in the constitution itself. The
constitution also must be ratified by a majority of all
adult tribal members in a special referendum. Approval
by an absolute majority requires that the affirmative
voters outnumber both the negative voters and the ab-
stainers. The constitutional referenda, which must pre-
cede congressional approval of agreements, ensure that
20
agreements are negotiated by tribal governments that
have the constitutional consent of the governed.
Tribes will retain the power to determine and define
their own form of government, but tribal constitutions
must explicitly guarantee the freedoms of speech, press,
assembly, religion and the other Bill of Rights protec-
tions now required by the Indian Civil Rights Act. 24 In
anticipation of the tremendous increase in tribal au-
thority under the new federalist policy, tribes should
strengthen the separation of powers between the legisla-
tive, executive and judicial branches of their govern-
ments. In the process, tribes could guarantee in their
constitutions judicial review by an independent judici-
ary, free from interference by the tribal council or
chairman. Furthermore, tribes can also forbid the use of
tribal enterprises as instruments of political patronage,
establish a tribal civil service, enact tribal laws against
corruption, and create "sunshine" rules to ensure that
all major decisions are made publicly.
Tribal Responsibility Means Accountability
In return for the transfer of federal resources and
functions, agreements must provide that tribal govern-
ments adhere to comprehensive federal laws prohibiting
corruption and guaranteeing fair elections. Specifically,
the federal criminal code must be amended to provide
that Indians are not deprived of the honest services of
tribal officials by improper payments or gratuities, con-
flicts of interest, concealment of records, and other
wrongdoing. Moreover, to ensure that corruption is vig-
orously rooted out, additional resources must be allocat-
ed to federal law enforcement. Corruption, no matter
what guise it hides behind, can no longer be tolerated.
It is the Committee's firm conviction that accountabil-
ity follows responsibility. If Indian tribal governments
are afforded true self-government within our federal
system, any misdeeds will rest squarely on their shoul-
ders, not left unaccountable in a maze of shared respon-
sibilities between federal and tribal governments.
B. THE OFFICE OF FEDERAL-TRIBAL RELATIONS
Every dollar granted to a tribe under the new system
will come directly out of the current federal Indian bu-
reaucracy's budget. To avoid asking federal officials to
plan their own agency's devolution, an Office of Feder-
21
al-Tribal Relations (OFTR) should be established within
the Executive Office of the President, tasked with nego-
tiating new agreements and overseeing their implemen-
tation. Since the President will negotiate agreements,
the OFTR must operate under his direct guidance, free
from the pressure of BIA and other agencies currently
active in Indian country. 25
The OFTR should negotiate with any tribe that
wishes to adopt an agreement. One of its initial tasks
will be to work with tribes and the Office of Manage-
ment and Budget to set standards of accountability (in-
cluding generally accepted accounting principles) for
tribal governments that sign an agreement. In drafting
these standards, guidelines should be modeled on those
established for state and local officials who handle fed-
eral funds. Sufficient staff and resources must be as-
signed to the OFTR to enforce the tribes' compliance
with the requisite standards of accountability. At the
same time, the OFTR must share information and co-
ordinate with federal law enforcement to guarantee
that criminal sanctions against corruption are fully en-
forced. 26
Depending on their unique circumstances and par-
ticular histories, different tribes are at different levels
of developing their capacity for self-governance. Some
tribes will be ready to immediately negotiate agree-
ments. Others will require technical assistance and sup-
port to strengthen their governments before entering
into agreements.
Because all agreements are voluntary, some tribes
probably will choose to remain under the management
of the current federal system until they can judge the
success of tribes that adopt agreements. The OFTR
should collect and disseminate data comparing the
progress of tribes under each system, giving Native
Americans additional information to decide whether
their tribe should pursue an agreement.
Although the first few tribes to reach agreements un-
doubtedly will face unforeseen obstacles, they should
soon find themselves profiting greatly from self-govern-
ment. For too long, federal red tape and shifting com-
mitments have forestalled the development of private
enterprise on the reservations. A consistent guarantee
of federal funds, without duplicative federal regulations
but accompanied by heightened standards of local ac-
22
countability, will provide private business with the
stable environment it needs. The advantages of our
market economy will now finally be available to the
American Indian people, freeing them from the welfare
dependency which has characterized the federal govern-
ment's policy. If American Indians are as successful
under the New Federalism as we anticipate, virtually
all tribes will sign agreements in the next few decades,
assuring that the billions now wasted on self-perpetuat-
ing federal bureaucracies will belong to the tribes them-
selves, to determine their own destiny.
III. Conclusion
The recommendations of the Special Committee call
for a new era in our collective history. By extending
American federalism to this country's long-neglected
first inhabitants and entering into agreements with
American Indians that afford them the full measure of
self-government, we will be renewing, on the 200th an-
niversary of our constitutional democracy, the most pro-
found ideals of the Founding Fathers.
Though based on uniquely American traditions, our
call for tribal empowerment finds a resonant echo
throughout the world. The United Nations has orga-
nized a Working Group to establish new international
legal standards for native citizens "believing that indig-
enous peoples should be free to manage their own af-
fairs to the greatest possible extent." Our northern
neighbor Canada has recently embarked on a program
of Indian self-government in which tribes receive multi-
year grants and have local autonomy, subject to federal
laws against corruption. While negotiations are proceed-
ing slowly, in the near future many Canadian Indian
tribes will achieve self-government. 27
A new era of agreements here in the United States, of
course, will strike fear in the hearts of federal bureau-
crats, who stand to lose their stranglehold over Indians.
Nor will it meet with favor among those corrupt tribal
officials who stand to lose their ability to hide behind
the federal government's failures.
Our proposal should, however, please both Indian and
non-Indian taxpayers who have seen their hard-earned
tax dollars squandered on a negligent and unresponsive
federal bureaucracy. All Americans will benefit from a
23
program that allocates federal resources to the people
they are intended to serve, rather than to inept bureau-
crats and corrupt officials. And all Americans will bene-
fit from a proposal that, at last, morally and legally ac-
knowledges the basic rights of our first inhabitants.
Most significant, American Indians themselves have
asked that the fraud and waste of federal funds cease
and their fundamental rights finally be recognized.
Their near universal call has been for full and account-
able self-government, guaranteed by federal support. It
is time to heed that call and begin the process of consul-
tation and negotiation leading to new agreements.
Since the first European settlers arrived on this conti-
nent, Indians have lost 97 percent of their land and
their population has been decimated by military as-
saults and fatal disease. These attacks were also de-
signed to rob Indians of their very identity, pushing
them to relinquish their language, arts and religion.
Yet despite brutal oppression and persistent attempts at
forced assimilation, Indian cultures and tribal identities
remain vibrant, continually strengthened by native
community institutions, including governments, schools
and religious organizations.
The history of the Indian people convinces us that
where federal control has failed, real Indian self-govern-
ment will succeed. By acknowledging the dignity of our
first countrymen, renewing the commitment made to
them by the Founding Fathers, and pledging a fresh
and full partnership, American Indians can finally in-
herit the birthright promised them two centuries ago.
I
ENDNOTES
THE EXECUTIVE SUMMARY:
A NEW FEDERALISM FOR AMERICAN INDIANS
1 For a brief history of American Indian affairs, see Part Two
infra.
2 Id.; We, the First Americans, Bureau of the Census, U.S. De-
partment of Commerce, 1989 at pp. 13-14.
3 For a description of the organization and conduct of the Special
Committee, see Appendix A infra.
4 See Part Three, Chapter 1 infra on Indian preference contract-
ing.
5 See Part Three, Chapter 2 infra on child sexual abuse in feder-
al Indian schools.
6 See Part Three, Chapter 3 infra on natural resources.
7 According to the Office of Management and Budget, fiscal year
1988 budget authority for all federal Indian programs was $3,314
billion. These figures do not include Small Business Administration
Section 8(a) contracts or federal funds and benefits that Indian gov-
ernments or individuals receive on some basis other than their
Indian status, such as Social Security or welfare. Federal Funding
of Indian Programs, Office of Management and Budget, June 13,
1989. Total Native American income was calculated by multiplying
the BIA service population (949,075) by per capita income figures
derived from the most recent Census Bureau statistics! Those per
capita income figures include all federal funds (both Indian and
general) received by Native Americans, as well as wages, salaries,
pensions, royalties and state welfare payments. See Indian Service
Population and Labor Force Estimates, Bureau of Indian Affairs,
Jan. 1989; We, the First Americans at pp. 1-28; American Indians,
Eskimos, and Aleuts on Identified Reservations and in the Historic
Areas of Oklahoma (Excluding Urbanized Areas), Bureau of the
Census, U.S. Department of Commerce, PC80-2-1D, Part 1; Ameri-
can Indian Areas and Alaska Native Villages: 1980, Bureau of the
Census, U.S. Department of Commerce, PC80-S1-13; General Social
and Economic Characteristics — U.S. Summary, Bureau of the
Census, U.S. Department of Commerce, PC80-1-C1 at Tables 251,
252.
8 See Part Three, Chapter 6 infra on corruption among tribal
governmental officials.
9 Part Three infra highlights some notable examples of innova-
tive tribal programs.
10 See Part Three, Chapters 1 and 2 infra.
1 " We, the First Americans at pp. 12, 25; Indian Service Popula-
tion and Labor Force Estimates at p. 1.
12 See Part Three, Chapter 3 infra.
(24)
25
13 Sec Part Three, Chapter 4 infra on the Indian Health Service.
14 See Part Three, Chapter 5 infra on Indian housing.
15 See Part Three, Chapter 6 infra.
16 Letter, Secretary of the Department of the Interior (E.A.
Hitchcock) to President Theodore Roosevelt, Jan. 29, 1907 at p. 5 (S.
Doc. 286, Senate Documents, Vol. 5, 59th Cong., 2d Sess.); Marvin L.
Franklin, Assistant to the Secretary for Indian Affairs, Department
of the Interior, Testimony, Realinement of the Bureau of Indian Af-
fairs Central Office, U.S. Congress, Senate, Hearings, Subcommit-
tee on Indian Affairs, Committee on Interior and Insular Affairs,
93rd Cong., 1st Sess., June 25, 1973 at pp. 90-208. See also Part Two
and Appendix B infra.
1 7 For a brief history of agreements between the United States
and Indian tribes, see Part Two infra.
ls Antoine v. Washington, 420 U.S. 194, 202-03 (1975) (holding
that 1891 Agreement between United States and Colville Confeder-
ated Tribes ratified by Congress has same legal force as treaty).
19 Id. at 202-04; United States v. Winans, 198 U.S. 371, 380 (1905).
20 Under Title 25 of the United States Code, for example, the
Secretary of the Interior now has the power to approve tribal con-
stitutions and bylaws, and "the choice of counsel and fixing of
fees." 25 U.S.C. § 476. The transfer of legal responsibilities to the
tribes will not in any way affect the obligations or federal funding
of state, county and municipal governments, school systems or
agencies.
21 In the case of multi-tribal federal agencies or service units,
special provisions will have to be negotiated between the federal
government and all relevant tribes, perhaps giving each tribe a pro
rata share of stock in the assets.
22 The size of each grant should be proportional to the tribe's
fraction of the total national BIA service population as of Novem-
ber 1, 1989.
23 Because new agreements will eliminate many federal jobs, the
U.S. government should provide assistance to federal employees
(especially Native Americans) who are not rehired by tribal govern-
ments or other federal agencies.
24 The Indian Civil Rights Act provides that tribal governments
shall not prohibit the free exercise of religion, or abridge the free-
dom of speech, press, or the right of the people peaceably to assem-
ble and petition for a redress of grievances; and further applies
most of the federal Bill of Rights, as well as other Constitutional
protections, to Indian tribes, including inter alia, the prohibitions
against unreasonable search and seizure, double jeopardy, self-in-
crimination, cruel and unusual punishment, taking of private prop-
erty, and denial of speedy and public trial, jury trial for criminal
offenses, and equal protection and due process. See 25 U.S.C. § 1301
et seq.
25 The OFTR, like the TSGG's, should be funded by an allocation
from the federal Indian bureaucracies.
26 Standards for fiscal accounting should be comparable to those
for rural county governments that receive significant federal
grants. Each tribe also should be required to publicly report certi-
fied financial statements analyzing the budgets of its government
and tribally-owned businesses. The OFTR will have to negotiate, on
26
a tribe-by-tribe basis, the specifics of the transition period, the han-
dling of multi-tribal federal services, and other issues. The OFTR
and any tribe with allotted land, in consultation with the allottees
themselves, will have to establish appropriate systems to manage
allottees' royalty payments.
27 Report, Working Group on Indigenous Peoples, Sub-Commis-
sion on Prevention of Discrimination and Protection of Minorities,
Commission on Human Rights, Economic and Social Council,
United Nations, Aug. 1989, E/CN.4/Sub.2/1989/36, Annex II; The
Sechelt Indian Band Self-Government Act, Bill C-93, The House of
Commons, 1st Session, 33rd Parliament, 33-34-35 Elizabeth II (May
21, 1986); The Cree-Naskapi (of Quebec) Act, The House of Com-
mons, 32-33 Elizabeth II (June 14, 1984).
PART TWO
A BRIEF HISTORY OF CONGRESSIONAL INVESTI-
GATIONS AND AMERICAN INDIAN AFFAIRS
FROM 1789 TO 1989
Because the Constitution stipulates that Congress
"shall have power ... to regulate commerce with for-
eign Nations, . . . and with the Indian tribes," the legis-
lative branch has played a leading role in federal
Indian policymaking for two centuries. Senators and
Members of Congress have set the terms for the unique
political and legal relationship between Native Ameri-
cans and the United States, and have been responsible
for developing federal programs to carry out the govern-
ment's obligations to the continent's aboriginal people.
This congressional responsibility has also extended to
investigating and evaluating federal programs and
began with the very first Congress in 1789.
President George Washington and the members of the
first Congress established a demanding set of policy-
making principles for the conduct of Indian affairs.
They spoke for a young and untested central govern-
ment, and yet they insisted that federal officials should
take the lead in managing relations with Native Ameri-
cans. To do otherwise, they believed, would allow local
governments to adopt a variety of contradictory policies
and would risk conflict, recrimination and chaos.
By declaring that the United States would speak to
Indian communities through legal agreements, Wash-
ington and the first Congress also sought to emphasize
that in the future both native leaders and federal offi-
cials would act on the basis of mutual respect and a
common desire for a stable, long-term relationship. In
adopting the treaty system they rejected a policy based
on short-term maneuvering and one-dimensional self-in-
terest. It should not be surprising, then, that in the
same year that our first Congressmen and Senators
were struggling to transform the ideals of the American
revolution into a functioning republic, they also fash-
(27)
28
ioned an ambitious blueprint for an honorable Indian
policy.
Unfortunately, expediency — not honor— too often has
characterized United States Indian policy during the
past two hundred years. In the decades following 1789
federal officials consistently upheld Washington's
Indian policy ideals, but during those same years they
also confronted a dizzying process of westward expan-
sion and frontier settlement. This process in turn un-
leashed economic and political shock waves which tore
at the nation's institutions and ideals.
During the first half of the nineteenth century, when
the persistence of slavery tarnished our national ideals
and raging sectarian tensions often poisoned our elec-
toral politics, national chauvinism and timid leaders
also conspired to undermine Washington's call for con-
sistency, stablility and fair-dealing in Indian affairs.
The era of the underground railroad and the Anti-
Catholic Know Nothings was also the era of the forced
removal of eastern Indians to lands across the Mississip-
pi.
By the end of the nineteenth century, expediency
overwhelmed the Founders' ideals. As military cam-
paigns were conducted against tribes across the West,
Congress began to turn from the practice of dealing
with native people through their governments. This
movement away from formal recognition of tribal gov-
ernments by treaty and agreement was deliberate, but
as it overturned nearly a century of precedent, it oc-
curred gradually.
A "treaty" by Constitutional definition is simply an
agreement by the President made "by and with the
Advice and Consent of the Senate." Even before the
Constitution was written, however, both the Continental
Congress and the first American Congress under the Ar-
ticles of Confederation chose to recognize Indian govern-
ments through agreements by treaty. Significantly, the
Constitution itself explicitly incorporated the continuing
legitimacy of those obligations.
Both historians and the Supreme Court have recog-
nized that the 1871 abolition of Indian treatymaking
grew out of sentiment in the House of Representatives
that it was being excluded from policymaking, and the
courts have held that this meant nothing more than
that after 1871 bilateral negotiations with Indians pro-
29
duced documents which, like treaties, were made by the
President, but were ratified by both Houses of Con-
gress. In fact, between 1871 and 1909 the United States
and the Indian tribes entered into 56 agreements, ap-
proved by Congress and carrying the force and effect as
treaties. The end of treatymaking, therefore, did not
mean the absolute end of federal recognition for native
governments. x
Nevertheless, in the decades after 1871 Congress
turned increasingly to policies which substituted federal
paternalism for local self-rule. In 1887 the United States
declared that it would begin to ' 'assimilate" Indian
people by treating them as individuals. During this
tragic era, federal officials sought to replace local lead-
ers with government agents. Both the United States
Army and state militia conducted brutal wars to subju-
gate resistant tribes and substitute federal power in the
place of traditional chiefs. Bureau of Indian Affairs' su-
perintendents, who were sometimes corrupt, and feder-
ally-subsidized missionaries imposed changes in all as-
pects of native life.
Only in the last two decades have significant, but cau-
tious, steps been taken toward renewed federal recogni-
tion of Indian governments. Resourceful native leaders,
heirs of those who survived the domination of the as-
similation era, have welcomed these decisions and
sought further validation of their claims to sovereignty.
However, this process has only begun.
Nations Within
establishing the treaty system
The first session of the Senate was called to order as
prescribed by the new United States Constitution on
Wednesday, March 4, 1789. Lacking a quorum (several
members were still enroute to New York in carriages
and on horseback), the group quickly adjourned, and did
not hold its first formal session for over a month. On
April 6 the appearance of Richard Henry Lee of Virgin-
ia made it possible for the body to form, count the bal-
lots cast for President and Vice President of the United
States and begin work. On May 25, less than a month
after the Presidential inauguration, and before the first
cabinet officers were confirmed or the judiciary orga-
nized, President George Washington forwarded his first
30
executive message to the Senate. It was a report from
Secretary of War Henry Knox which contained two
treaties between the United States and ' 'certain north-
ern and northwestern tribes" negotiated at Fort
Harmar on the Muskingum River the previous winter.
These documents forced the young government to
decide the basis upon which it would deal with the con-
tinent's native people. 2
Before Secretary Knox's report and its accompanying
treaties could be acted upon, however, a second — and
far more threatening — treaty problem arose for the
Senate to consider. In the Southeast, a powerful confed- •
eracy of Creek Indians led by Alexander McGillivray
had succeeded in throwing the Georgia and Carolina
frontiers into panic. The tribe had allied itself with the
Spanish in St. Augustine and was resisting white en-
croachments on their lands and carrying out raids
against outlying counties. McGillivray not only operated
with the support of the Spanish, but he had the sympa-
thy of nearby Cherokees and other well-armed (and re-
cently pro-British) tribes.
During the summer of 1789, the President began re-
ceiving urgent requests from state officials in Georgia
for federal assistance. On August 22, to underscore the
importance of the Creek-Georgia crisis, Washington ap-
peared personally in the Senate chambers for the first
time since his inauguration. He and Secretary Knox
wanted the advice of the Senate. How should they pro-
ceed? Should they declare war? Negotiate? Recognize
the Creeks by legal agreement? Grave issues of federal
unity and national security were at stake. Faced with
this threat, the President urged caution. He wrote: "to
conciliate the powerful tribes ... in the southern dis-
trict, amounting probably to fourteen thousand fighting
men, and to attach them firmly to the United States,
may be regarded as highly worthy of the serious atten-
tion of the government." 3
After two days with the Senate, Washington persuad-
ed the Senators that the United States should pursue a
diplomatic solution to the Georgia conflict. The Presi-
dent dispatched commissioners to Georgia to attempt to
negotiate a formal treaty with the Creeks. A Creek
Treaty was eventually signed by the President and
tribal leaders in New York the following year. 4
31
With the Creek experience behind them, the Senators
then turned back to the Fort Harmar agreements. De-
spite considerable sentiment that Indian agreements
"have never been solemnly ratified by either of the con-
tracting parties, as hath been commonly practised
among the civilized nations of Europe," the Senate
stuck to the procedure developed with Washington in
the Creek crisis. As the President himself had written,
treaties should be adopted with Indian tribes as the
United States had with European nations. It was "both
prudent and reasonable," Washington noted, that
Indian treaties "should not be binding on the nation
until approved and ratified by the Government." With
an eye to the future, President Washington added, "It
strikes me that this point should be well considered and
settled, so that our national proceedings, in this respect,
may become uniform, and be directed by fixed and
stable principles." 5
The decision to deal with Indians by treaty was not
taken lightly or innocently. Treaties came to the first
Federal Congress in part because its predecessors— both
the Continental Congress which functioned during the
beginning of the revolution and the Congress which op-
erated under the Articles of Confederation — followed
this custom. But the question of ratification forced the
young government to address the significance of its
commitments to the tribes. The Senate ultimately en-
dorsed Washington's call for uniform treaty recognition
of Indian nations directed by the "fixed and stable prin-
ciples" of the young republic's overall relations with
foreign powers. To act on any other basis, Secretary
Knox wrote to the President, "would be a gross viola-
tion of the fundamental laws of nature, and of that dis-
tributive justice which is the glory of a nation." 6
CONGRESSIONAL INVESTIGATION IN THE EARLY REPUBLIC
Significantly, when Congress launched its first inves-
tigation of the executive branch of government in early
1792, the subject was Indians. And equally significant,
when the investigating committee asked, "Why was
General St. Clair's army destroyed at the headwaters of
the Wabash River?" it was already testing the "fixed
and stable principles" which underlay federal Indian
policy.
32
Half an hour before sunrise on the morning of No-
vember 3, 1791, a force of about 1,000 warriors attacked
an American army of 1,400 soldiers and militiamen
under Major General Arthur St. Clair twenty-nine
miles north of Fort Jefferson, a newly constructed out-
post near the site of modern Greenville, Ohio. Within
minutes the attack became a rout; when St. Clair and
his remaining troops arrived at Fort Jefferson the fol-
lowing morning, 657 soldiers lay dead behind him,
nearly three times the casualties suffered by Lt. Col.
Custer's troops 85 years later at the Little Big Horn.
News of St. Clair's defeat reached the new national
capital in Philadelphia in early December; the defeated
general himself appeared a few weeks later. With the
Congress not yet divided between Federalists and Re-
publicans, concern over the disaster did not become a
focus of inter-party recrimination. Congress acted
slowly. The magnitude of the defeat, however, and St.
Clair s own wish to defend his professional reputation
finally moved the House of Representatives to act. On
March 27, 1792 the House approved a resolution author-
izing a committee of seven to conduct an independent
inquiry into the entire affair. 7
Following some initial hesitancy concerning the re-
lease of documents from the executive branch, Presi-
dent Washington agreed to cooperate with the investi-
gating committee. Committee clerks copied relevant sec-
tions of departmental reports and communications for
use as evidence in the inquiry, and witnesses (including
the Secretaries of War and Treasury) were called to tes-
tify in public sessions. The investigating committee sub-
mitted a draft report at the end of the congressional
session in May, but action on the report was delayed.
When the Congress reconvened in the fall of 1792, all of
the principals requested an opportunity to explain
themselves. A second round of hearings dragged on
through the winter and ended inconclusively on Febru-
ary 26, 1793, when the House voted to disband the com-
mittee without adopting its report. 8
The St. Clair inquiry focused on the conduct of the
general himself, the orders he received from the Secre-
tary of War, and the quality of his subordinates, parti-
culary Quartermaster Samuel Hodgdon. The assump-
tion behind the investigation was that skillful leader-
ship (and ample supplies) would have either prevented
33
the conflict or produced an American victory. Clearly,
both the investigation and the popular sentiment which
supported it accepted the legitimacy of a federal mili-
tary presence in the Ohio country and favored contin-
ued American expansion into tribal areas. Congressmen
were not interested in exploring the grievances of the
Ohio confederacy which launched the attacks against
St. Clair. The Indians' claim that they were not bound
by the land cessions made at Fort Harmar would have
fallen on deaf ears.
The St. Clair inquiry thus reflects Congress' sense of
itself in the 1790's as guardian of federal policy towards
Indian tribes as well as its susceptibility to pressure
from advocates of national expansion. The investigation
responded to dissatisfaction with the prospects for
American settlement rather than complaints about the
treaty system itself. When, during the debate on wheth-
er or not to conduct an investigation of St. Clair's
defeat, one North Carolina congressmen cried that "jus-
tice to the public, . . . demands an inquiry," he was
speaking for those who, in the decades ahead, would
exert increasing pressure on federal officials to subsi-
dize further frontier settlement and to abandon their
commitment to "fixed and stable principles." 9
CONGRESSIONAL INITIATIVES IN THE REMOVAL ERA
As the nineteenth century began, federal Indian
policy appeared to be operating on two parallel tracks.
On the one hand, American officials endorsed the
formal recognition of tribal groups through treaties. Be-
tween 1800 and 1825, 113 Indian treaties were ratified
by the U.S. Senate. On the other hand, Indian-white re-
lations continued to reflect the political power of fron-
tier settlers and their representatives in Congress. The
victory of General "Mad" Anthony Wayne at Fallen
Timbers in Ohio in 1794 avenged St. Clair's defeat and
"opened" the Northwest Territory for American settle-
ment. In a similar sequence a decade later, William
Henry Harrison combined delicate diplomacy with
brute force to reduce the areas of tribal influence in In-
diana and Illinois. His actions spurred the remnants of
the old Ohio Indian confederacy to rally to Tecumseh
and his brother the Shawnee Prophet and to side disas-
trously with the British during the War of 1812. In the
Southeast, many Creeks continued to resist Georgia set-
34
tiers. They too joined the Redcoats when fighting with
the Americans resumed in 1812. These conflicts only
added to the anti-Indian sentiment that already existed
in frontier areas.
The centerpiece of federal administration of Indian
affairs during the early nineteenth century was a series
of laws called the Trade and Intercourse Acts. The first
of these was adopted in 1790; subsequent versions were
adopted until 1834 when a comprehensive form of the
act was passed. As the act was revised, an Indian Office
was established to oversee relations with the tribes. The
Trade and Intercourse Acts followed both tracks of gov-
ernment policy. They were concerned primarily with
regulating commerce and movement across the bound-
aries separating Indian communities and non-Indian
settlements, thus implicitly recognizing the presence of
tribal entities. At the same time, the acts encouraged
the Indian trade and established procedures for acquir-
ing Indian lands. In this sense they accommodated the
American public's desire for expansion into native
areas.
While no formal investigations of Indian affairs took
place during the first quarter of the nineteenth century,
congressional committees were frequently drawn into
conflicts between settlers, traders and the Indian tribes.
Particularly following the admission to the Union of
several new states in the wake of the War of 1812 (Mis-
sissippi, Alabama, Louisiana, Illinois and Missouri), leg-
islators began casting for a way to accommodate non-
Indian settlers and traders without abandoning the
Trade and Intercourse Acts' recognition of tribes and
treaties. 10
The most significant congressional inquiry of this
period was chaired by Ohio Senator Jeremiah Morrow,
who served on both the Committee on Indian Affairs
and the Committee on Public Lands. Early in 1817
Morrow submitted a report from the lands committee
which proposed to exchange tribal property near white
settlements for public lands in isolated areas. When In-
dians and whites lived close to one another, Morrow
noted, "the causes of provocation to hostility . . . are
multiplied, and . . . the means of protection and de-
fence . . . diminished." "Removal" of tribes to distant
territories, he argued, would "give strength to . . . na-
tional defence" and promote the "compact population"
35
of both groups. Morrow concluded his report with the
stipulation that his idea "must be effected by negotia-
tion and treaty in the usual manner." During the next
decade, Morrow's report would form the basis for a new
policy direction in Congress. 1 l
Three years after Morrow's report, the House of Rep-
resentatives called on Secretary of War John C. Cal-
houn to report on the "progress" of the tribes engaged
in trade with the United States. His sentiments mir-
rored the reasoning in Morrow's report. "It is impossi-
ble," Calhoun observed, "that Indians should exist as in-
dependent communities in the midst of civilized society.
They are not, in fact, an independent people (I speak of
those surrounded by our population) . . . . " During the
1820's confrontations between western states and their
Indian populations multiplied. The state of Georgia,
whose leaders recalled their claims on federal assistance
in 1789, acted unilaterally to abolish the government of
the Cherokees who lived within its borders. Similar, if
less dramatic, crises threatened to break out in Ala-
bama, Mississippi, Indiana and Illinois. 12
With the election of westerner Andrew Jackson to the
Presidency in 1828, and the rising militancy of tribes
like the Cherokees and Seminoles, the two tracks of fed-
eral Indian policy were destined to collide. If the tribes
refused to retreat voluntarily, settler complaints could
no longer be satisfied within the framework of the fed-
eral treaty system. In Congress, Senators and Repre-
sentatives continued to grope for a compromise which
would satisfy both impatient westerners and the "fixed
and stable principles" of treatymaking. An emerging
new perspective was articulated most fully by Senator
Hugh Lawson White of Tennessee, Chairman of the
Senate Committee on Indian Affairs. White's committee
issued a long report in February, 1830 arguing for a
series of removal treaties with eastern tribes.
White, who had succeeded to Andrew Jackson's
Senate seat in 1825, used two arguments in his report.
First, he alluded to state sovereignty by noting that the
Indians' treaties were with the United States, whereas
the laws of the states rested on the independence they
had achieved July 4, 1776 on the occasion of their sepa-
ration from Great Britain. In his view, state laws should
take precedence over federal treaties. With sectional
tensions beginning to tug at the nation, White's en-
36
emies hesitated to contradict his bold defense of state
sovereignty. In addition, the Tennessee Senator de-
clared that removal was actually a humanitarian policy.
If the tribes resisted removal, he predicted that "the
consequences which must inevitably ensue, are such as
the humane and benevolent cannot reflect upon without
feelings of the deepest sorrow and distress." Two
months later the Senate adopted White's proposal by
authorizing the President to negotiate removal treaties
and to spend up to $500,000 to carry them out. With
House concurrence, the Removal Act became law on
May 28, 1830. 13
While the removal of tribes under the 1830 act re-
quired substantial amounts of federal persuasion, in-
timidation and — ultimately — force, the process did not
appear to shake Congress' commitment to the treaty
system as the principal instrument of federal policy.
Even the most notorious removal — the Cherokee "Trail
of Tears" to Oklahoma — was accomplished with a
treaty, the hated agreement signed by a minority of the
tribe at New Echota in 1835. The United States Su-
preme Court, which became the focus for a final con-
frontation between Georgia and the Cherokees, adopted
a similarly ambiguous position when Chief Justice John
Marshall ruled that an Indian tribe did not constitute a
"foreign state," but that it was a "domestic dependent
nation." 14
THE EMERGENCE OF RESERVATIONS
Following the tumultuous events of the 1830's, with
Indian communities now relocated on the western
border of the United States, members of Congress be-
lieved they had solved the "Indian problem." The
Indian Office became a favorite source of political pa-
tronage and tribal affairs receded from center stage in
national politics. Policymakers debated the annual ap-
propriations bill, but paid little attention to new initia-
tives. They believed that the tribes were free to develop
undisturbed in their new lands and that they might
eventually affiliate in some way with the United States.
The House Committee on Indian Affairs, for example,
added a proposal to create a western territory for Indi-
ans when it adopted a revised version of the Trade and
Intercourse Act in 1834, and suggestions for the forma-
37
tion of an Indian state surfaced repeatedly during the
next ten years.
This peaceful setting changed dramatically in 1846.
Suddenly, in the space of a few months, a war with
Mexico and the settlement of the Oregon boundary dis-
pute incorporated 1 million square miles of land and
250,000 additional native people within the revised
boundaries of the nation. With new and distant western
borders, the United States no longer had a fixed terri-
tory where Indians might be resettled.
Congress responded to the sudden expansion of the
United States with two administrative reforms. First,
four bureaus concerned with domestic affairs — the
patent, land, pension and Indian offices— were taken
from the Departments of State, Treasury and War to
form the Department of the Interior. President Polk's
administration proposed the change in the closing days
of its term in office, arguing that the responsibilities of
the Indian Office had been "vastly increased" with the
incorporation of tribes in Texas, Oregon, New Mexico
and California into the nation. The change was signed
into law on March 3, 1849. 15
Second, in February, 1851, the Congress approved the
creation of three superintendencies to manage the
tribes east of the Rockies, and authorized agents to be
appointed in New Mexico and Utah. Additional legisla-
tion created superintendencies for California, Oregon
and Texas. The Indian Office was changing from a
bureau to supervise trade and diplomacy with tribes to
a nationwide network of superintendents and agents
charged with managing small groups who were being
engulfed by a surging population of white settlers. 16
None of the men who served as Commissioner of
Indian Affairs during the 1850's came to the post with
any experience in the field. Nevertheless, in a response
to the national expansion of the day, each commissioner
became an advocate of permanent homes — or reserva-
tions—for the nation's tribes. As Commissioner George
W. Manypenny wrote in 1856, the "wonderful emigra-
tion" to the West "blotted" native people out of exist-
ence "unless our great nation shall generously deter-
mine that the necessary provision shall at once be
made, and appropriate steps be taken to designate suita-
ble tracts or reservations of land, in proper localities,
40
The Joint Special Committee reached five general
conclusions at the end of its labors:
The Indians everywhere, with the exception
of the tribes within the Indian Territory, are
rapidly decreasing in numbers. . . .
Indian wars are to be traced to the aggres-
sions of lawless white men. . . .
Even after territorial governments are estab-
lished. . . the population is so sparse and the
administration of the civil law so feeble that
the people are practically without any law. . .
the boundaries of Indian reservations are
wholly disregarded. . . .
The Indian Bureau should remain where it is
(and not be re-attached to the War Depart-
ment).
As the best means of correcting. . . abuses,
the committee recommends the subdivision of
the Territories and States, wherein the Indian
tribes remain into five inspection districts, and
the appointment of boards of inspection. . . .
Such boards. . . will doubtless sometimes save
the government from unnecessary and expen-
sive Indian wars. 21
The Joint Special Committee rejected the idea that
further warfare with Indian communities was desirable
or inevitable. The Committee also suggested that better
"supervision and inspection" could overcome the law-
lessness of the West and reverse the decline in native
population. The Committee argued in essence that a
new kind of federal intervention was essential for
Indian survival. 22
Six months after the Special Committee's final report.
Congress authorized a commission to "establish peace"
with the Kiowa, Cheyenne, Sioux and other hostile
tribes in the West. During the remainder of 1867, this
"Peace Commission" negotiated agreements withjthe
Crow, and all the major Lskota Sioux bands at Fort
Laramie, Wyoming, and with leaders of the Kiowa, Co-
manche, and Apache at Medicine Lodge Creek, •£ south-
ern Kansas. The Special Committee also had recom-
mended "th£t the intercourse laws with the Indian
tribes be thoroughly revised," preferably by placing
41
tribal affairs in the hands of "an independent bureau or
department." In 1869 Ulysses S. Grant gave these con-
cerns Presidential approval by requiring agency ap-
pointment be made by Christian churches and promis-
ing to "bring all the Indians upon reservations, where
they will live in houses, and have schoolhouses and
churches, and will be pursuing peaceful and self-sus-
taining avocations. . . . Supporters of the idea were
quick to label it the "Peace Policy." 23
As the effort to orchestrate peace on western reserva-
tions gained momentum, the House of Representatives,
shut out of Indian policy by the treaty prerogative of
the Senate, began to assert that there was no longer
any need to deal with Native Americans on the basis of
the legal form of treaties. The first attempt to abolish
treaties occurred in 1867 when an amendment was of-
fered to the annual Indian appropriations bill stipulat-
ing that no further treaties could be made without Con-
gressional authorization. This effort failed because the
Peace Commission was in the midst of ongoing negotia-
tions.
The issue continued, however. The House voiced its
marked resentment that treaties had allocated power
over Indian affairs nearly exclusively to the Senate. The
House then added the stipulation that existing treaties
would remain in force. In March, 1871, the Forty-First
Congress, faced with a House of Representatives deter-
mined to exercise equal jurisdiction with the Senate in
Indian affairs, inserted a brief rider to the Indian Ap-
propriation Act. It stated:
That hereafter no Indian nation or tribe within
the territory of the United States shall be ac-
knowledged or recognized as an independent
nation, tribe, or power with whom the United
States may contract by treaty: Provided fur-
ther, that nothing herein contained shall by
construed to invalidate or impair the obligation
of any treaty heretofore lawfully made and
ratified with anv such Tndian j»2,ti0ii or tribe. 24
Despite the formal resolution of 1871, hundreds of
previously negotiated treaties remained in force and for
over 30 years both Houses of Congress approved 56 addi-
tional agreements with tribes. Congress also continued
to appropriate money for treaty-mandated annuities
42
and to carry out other provisions regarding boundaries,
penalties for trespass and the prerogatives of tribal gov-
erning bodies. Moreover, the federal government was
specifically authorized to enter into negotiations with
individual tribes and to commit the United States to act
on the outcome of those proceedings, provided they were
approved by a majority of both Houses of Congress.
The Assimilation Era
Despite considerable continuity, it was clear in the
last decades of the nineteenth century that a new era of
Indian policymaking was at hand. Congress and the
Indian Office adopted a growing array of procedures
which were designed to destroy the coherence of Indian
communities by individualizing and assimilating their
people and their property. Spurred by a mixture of hu-
manitarian concern, greed, religious fervor and a sense
of cultural superiority, policymakers approved new laws
that broke up tribal landholdings, sold off community
resources, and incorporated Native Americans into the
United States.
Throughout this unhappy century, Indian communi-
ties held to traditions and institutions that supported
their separate identities. They practiced their religions
in secret or adapted them to satisfy federal regulations,
they developed new leaders and new emblems of people-
hood, and they continued to resist outsiders who insist-
ed they give up their traditions. Indian life changed
dramatically, but native people continued to consider
themselves members of distinctive groups and to resist
federal paternalism.
SENATOR DAWES AND THE GENERAL ALLOTMENT ACT
During the 1870's and 1880's momentum built in Con-
gress and among the general public for a new federal
program that would incorporate Native Americans into
the United States and solve the ' 'Indian problem" once
and for all. As Helen Hunt Jackson wrote in 1880 in a
polemical appeal sent to every Senator and Representa-
tive, the time had come for the legislative brancn lC
1 'cover itself with a lustre of glory, ... to cut short our
nation's record of cruelties and perjuries! ... to at-
tempt to redeem the name of the United States from
the stain of a century of dishonor !" 25
43
A seemingly endless round of military humiliations
fueled the search for a new approach to Indian affairs.
During the 1870's, the U.S. Army found itself both em-
barrassed by small Indian units such as Chief Josepn's
Nez Perce (who led the cavalry on a highly-publicized,
four-month chase through Idaho and Montana), or sty-
mied by fierce coalitions of hunting tribes such as the
one which destroyed Custer's command in eastern Mon-
tana in 1876. These defeats indicated that Americans
had failed to win the loyalty of native people, and that
after a century of experience, the nation's policymakers
had yet to devise a method for dealing effectively and
fairly with native communities.
The embarrassment of military leaders and the oppo-
sition of many Democrats to the growing size of the pa-
tronage-rich and often corrupt bureaucracy at the
Indian Office stimulated a concerted effort to transfer
tribal affairs back to the War Department. During the
1870's, Army officers argued with increasing vehemence
that civilian authorities brought on warfare through
their inexperience and corruption. At the same time,
the intense political competition of the decade (which
included the famous "stolen election" of 1876) encour-
aged Democrats to attack the Indian Office for assign-
ing Indian agencies to eastern hacks who had no qualifi-
cations beyond their Republican party label. Protests
like these reached their peak in 1878 when Congress
created a Joint Committee to study the matter.
Chaired by Republican Senator Alvin Saunders of Ne-
braska, the Joint Committee traveled to reservations
and military posts in Indian Territory, Texas and Ne-
braska during the fall of 1878, conducted hearings for
two weeks in Washington, D.C., and gathered an enor-
mous body of written testimony from nearly every
Indian agency in the country. Despite its efforts, howev-
er, the Committee could not escape party politics; it sub-
mitted two reports, one (from its Democratic member)
favoring transfer, and another (from the Republicans)
opposing it. With the battle lines drawn so rigidly on
the issue, Congress in the 1880's turned away from the
question of transfer and cast about for other solu-
tions. 26
It seemed that something had to be done. The bulk of
the Native American population inhabited federal terri-
tories and were a special federal responsibility. White
44
settlements were multiplying in the West as new trans-
continental railroads carried thousands of would-be
farmers to the Plains, the* Southwest and the Pacific. In
response, a small group of legislators led by Massachu-
setts Senator Henry L. Dawes searched for a politically
acceptable policy that would save Indians from violence
and displacement while allowing white expansion to
continue. As with Senator Doolittle nearly twenty years
before, Henry Dawes' ideas about Indians were made
plain during a Senate Committee investigation of "the
condition of Indians." 27
The investigation was launched in 1884 with a Senate
resolution calling on the Indian Affairs Committee to
examine the tribes in the Indian Territory (both the re-
settled eastern tribes and western tribes such as the
Cheyenne) and native communities in other areas who
were involved in leasing their lands to ranchers. The in-
quiry was launched in response to mounting pressure to
open the Oklahoma lands to non-Indian settlement as
well as to claims that tribes were being cheated out of
potential income by fraudulent cattle leases.
Senator Dawes submitted the Committee's final
report in June, 1886. Rather than an examination of
specific complaints, it contained a lengthy discussion of
treaty rights and assimilation. Dawes noted that the
"civilized tribes" of Oklahoma (Cherokee, Creek, Choc-
taw, Chickasaw, Seminole) "are so conspicuously in ad-
vance of all other North American Indians . . . that it
is instructive to understand the real causes of their ele-
vation. . . ." Moreover, the Committee asserted that
the achievements of this group could be duplicated else-
where. In fact, "the time required for this degree of
progress will be shortened by the many favoring influ-
ences that are now present and at work." But Dawes
did not recommend that all tribes be granted independ-
ence and the recognition Oklahoma tribes had enjoyed
for nearly half a century. He focused instead on the
need for private land ownership. He wrote that the di-
rection of future policy was clear: "to reduce the reser-
vations to such limits as will enable the Indians to use
what they retain and to vest the titles in individ-
uals." 28
In February, 1887, in the wake of the Dawes Commit-
tee's report, Congress adopted the General Allotment
Act, the nation's first piece of general Indian legislation
45
since 1834. The Dawes Act, as it was called, provided for
the division of reservation lands into individual home-
steads, the extension of U.S. citizenship to all who took
a separate allotment, and the sale of all "surplus" real
estate (lands remaining after the assignment of home-
steads to tribal members). Dawes and his supporters
pointed out that the allotment law contained a number
of protective features: Indian farms could be neither
sold nor taxed for 25 years, surplus land sales required
tribal approval, and the entire process would be applied
gradually— only at the President's discretion. "If we are
to set the Indian up in severalty," Senator Dawes told
his colleagues, "we must throw some protection over
him and around him and aid him for awhile in his
effort; we must countenance the effort; we must hold up
his hand." 29
After 1887 the purpose of federal policy became in-
creasingly the destruction of community self-govern-
ment and the incorporation of individual Native Ameri-
cans into the United States. Senator Dawes' humanitar-
ian statements reveal his hope that this process would
be gradual and buttressed by government assistance,
but over the next three decades the Massachusetts Sen-
ator's statements were replaced by the practical voices
of men elected to represent the people who were intent
on developing the economic resources of the Far West.
They believed, as Senator Charles Manderson of Ne-
braska told his colleagues in the 1890's, "there is no
greater friend of the Indian, no man who desires his ad-
vancement more than the white man who lives by his
side." 30
EFFORTS TO REDUCE THE FEDERAL ROLE IN INDIAN AFFAIRS
During the remaining years of the nineteenth centu-
ry, a series of conflicts between western Indian commu-
nities and their new, non-Indian neighbors revealed the
nature of the advancement Senator Manderson had in
mind. Repeatedly, pressure to allot reservations over-
rode efforts to delay the division of tribal lands and
slow the forces of "progress." The most dramatic exam-
ple of this trend was the forced allotment of the Chey-
enne and Arapaho reservation in western Oklahoma
Territory. There, a community of over 3,200 people, who
a decade earlier had been living off the buffalo, had the
misfortune to occupy an area coveted by a surging popu-
46
lation of non-Indian farmers. Despite warnings from
tribal leaders and Indian Office officials, allotment was
forced on the tribes and on April 19, 1892, 25,000 new
"neighbors" stampeded onto their "surplus" lands. 31
In addition to accelerating the pace of allotment
itself, western interest in "advancement" also under-
mined the tribes' ability to negotiate freely for the sale
of their surplus lands. Theoretically, lands remaining
after every tribal member had received a homestead
would be sold to finance future community develop-
ment. As the severalty process expanded in the 1890's,
however, Congressmen began to balk at the prices the
government negotiators had agreed to pay for these
lands and they refused to ratify the sales. This obstruc-
tion was temporary, however, for in 1903 the U.S. Su-
preme Court ruled in Lone Wolf v. Hitchcock that Con-
gress could act unilaterally to alter the land sale provi-
sions of a treaty (and, by extension, other statutory pro-
cedures) because of its "plenary power" in Indian af-
fairs. In the wake of this decision, tribes had no power
to resist surplus land sales approved by Congress, and
the pace of reservation "openings" accelerated yet
again. As Commissioner of Indian Affairs William A.
Jones told the House Committee on Indian Affairs,
"The decision in the Lone Wolf case will enable you to
dispose of land without the consent of the Indians. If
you wait for their consent in these matters, it will be
fifty years before you can do away with the reserva-
tions/' 32
Congressional committees were often aware of the
problems which arose when settlers moved rapidly into
what had previously been an Indian community. But ex-
posure of Indian suffering did not call the assault on
Indian tribes into question. For example, in 1888 the
Senate created a Select Committee on Indian Traders to
"inquire into the methods of allotting lands in severalty
to Indians ... in the northern portions of Wisconsin
and Minnesota." In 1896 a similar investigation was
launched on the Osage reservation in Oklahoma. Both
committees found that Indians had been cheated
(through fraudulent timber sales and unethical local
merchants), but both blamed corrupt officials for the
problems they encountered; neither panel traced the na-
tives' difficulties to the process of individualizing Indian
property. 33
47
Congress reaffirmed its commitment to allotment in
1898 when it unilaterally terminated the tribal status of
the "civilized tribes" in Indian Territory, and opened
the way for Oklahoma to become a state. The tribes
there resisted, but by 1907 over 100,000 people had been
recorded on the final rolls of the Five Civilized Tribes
and 15,794,400 acres of real estate had been assigned to
them as homesteads. When Oklahoma entered the
union on September 17, 1907, Indian reservations were
destroyed.
By 1910 it was clear to most observers that allotment
had not brought prosperity to Indian communities. The
division of tribal lands and the opening of "surplus"
holdings to non-Indians was successfully integrating
native resources into the national economy, but the In-
dians themselves did not appear to have benefited mate-
rially from the transaction. As had been the case in the
1890's, however, investigations into social conditions
among tribes led legislators to question the administra-
tion of federal policies rather than the nature of the
policies themselves.
Reflective of legislative attitudes during the years
before World War I was the report of a special Joint
Commission of Congress to Investigate Indian Affairs,
created by resolution on June 30, 1913. Chaired by Sen-
ator Joseph T. Robinson of Arkansas, the Commission
consisted of three Senators and three Congressmen.
Only one member of the group— Senator Charles Town-
send of Michigan— was from a state east of the Missis-
sippi. In its report, filed in March, 1915, the Commis-
sion pointed to a number of problems afflicting Indian
communities (poor health conditions, illegal liquor sales,
inadequate Indian schools), and an equal number of
problems affecting the administrative efficiency of the
Indian Office. Among the latter were: the quality of the
department's inspection service, its finance and account-
ing methods, its policy with regard to Indian reclama-
tion projects, and its handling of grazing leases. While
the Commission did not make formal recommendations
to Congress, its report suggested a number of modest
changes. In the area of health care, for example, the
Commission wrote that the "prevailing insanitary con-
ditions of Indian life" would best be improved by enlist-
ing the help of "public-spirited citizens who avow their
interest in the welfare of the Indian race, and whose ef-
48
forts are at present unorganized and therefore some-
what misdirected and unavailing." Similarly, schools
would be improved with "practical training and instruc-
tion in hygiene and sanitation." The Joint Commission
did not address underlying problems such as loss of
land, the termination of tribal governments, or the fail-
ure of western states to guarantee Indian voting
rights. 34
In 1920 an extensive review of "the condition of
Indian affairs in the Southwest and Northwest" submit-
ted by a nine-person subcommittee of the House Indian
Affairs Committee reached similar conclusions. After
interviewing 189 witnesses and traveling 9,000 miles,
the Committee (which included Congressmen from
Oklahoma, Arizona, New Mexico, and California) made
a series of general recommendations. They urged that
all Indians 21 years of age or older who had completed
the seventh grade of school "be given certificates of
competency and have turned over to them anything due
them from the Government and then be required to
work out their own salvation." The report also sug-
gested decentralizing Indian Office activities and trans-
ferring all Indian forestry and health service activities
to the U.S. Forest Service and the U.S. Public Health
Service, respectively. Finally, the Committee recom-
mended that "all surplus Indian lands, not necessary
for the use of the Indians themselves, should be leased
or sold for their benefit and in the interest of all the
people of the country." 35
During the 1920's support for the individual incorpo-
ration of Indians into the national population was so
strong that legislators and administrators had begun to
move more confidently towards issuing final titles to
Indian allottees and terminating the federal role in
Indian affairs. "As soon as the nation rids itself of de-
pendents," one agency superintendent wrote his superi-
ors in Washington, "the more virile it can become." 36
Such sentiments appealed to Charles Burke, the former
Congressman from South Dakota who served as Indian
Commissioner from 1921 to 1929, and to legislators who
were eager to reduce the federal budget and avoid sensi-
tive racial issues.
It also appealed to a broad cross-section of experts
who assembled in Washington, D.C. in December, 1923,
at the invitation of Secretary of the Interior Hubert
49
Work. Dubbed the "Committee of One Hundred," the
group had been called together to review all aspects of
federal Indian policy. When the group issued its report
in 1924, their first recommendation was the "early
ending of government activities":
[Speeding] up the work of the Indian Bureau
[would] result in large ultimate savings to the
Government through an earlier ending of many
if not all of the Government activities for
Indian welfare. 37
Reflecting similar concerns, the Indian Office in 1926
commissioned a private study of conditions among
American Indians. Undertaken by the Institute for Gov-
ernment Research (later called the Brookings Institu-
tion), this report was completed under the direction of
Lewis Meriam. It catalogued the failures of federal
policy and reported the grim facts of modern Indian
life: low per capita income, high infant mortality rates,
poor health conditions and deplorable housing. But the
report did not recommend a shift away from the indi-
vidualistic goals and paternalistic policies of the day. 38
During 1927 and 1928 the Senate debated creating an-
other investigations subcommittee. Non-Indian reform-
ers, including one outspoken young defender of Indian
interests named John Collier, claimed that the Indian
Office denied Indians the full rights of citizenship, while
legislators like Wisconsin Senator James Frear empha-
sized the need to end federal supervision. "Con-
gress, . . . must now, . . . enable these wards of the
Nation to enter into the privileges and responsibilities
of citizenship," Frear told a Senate hearing, adding that
this "can never be done under the present archaic, ty-
rannical, and exploiting system of the Indian
bureau." 39
On February 1, 1928, the U.S. Senate, noting in part
that "the control by the Bureau of Indian Affairs of the
persons and property of Indians is preventing them
from accommodating themselves to the condition and
requirements of modern life," authorized the creation of
an investigations subcommittee of the Committee on
Indian Affairs. The subcommittee was charged with
making "a general survey of the condition of the Indi-
ans" and exploring "the relation of the Bureau of
Indian Affairs to the persons and property of Indians."
50
Republican Lynn Frazier of North Dakota chaired the
new panel. He was joined by one Senator each from
Wisconsin and Montana and two from Oklahoma. 40
The Investigations Committee began holding hearings
on the Yakima Reservation in November, 1928. It
moved on to California and Utah before returning to
Washington, D.C. The following summer found it in
Wisconsin and South Dakota. As the hundreds of pages
of testimony began to accumulate, however, the only
consistent theme in the Committee's deliberations ap-
peared to be criticism of the Bureau of Indian Affairs.
Senators heard of waste, mismanagement, health prob-
lems and Indian poverty, but few witnesses added any-
thing to the well-established cries for efficiency, fair-
ness, and reform of the mismanaged BIA.
At the end of the Hoover Administration, Congress
remained convinced that the incorporation of individual
Indians into the United States should be the preemi-
nent goal of federal policy. Despite evidence that native
communities were persisting as distinctive enclaves, and
that the allotment program had not accomplished its as-
similationist objectives, legislators continued to believe
that Native American problems were a consequence of
faulty administration.
THE INDIAN REORGANIZATION ACT AND THE TERMINATION
ERA
Many commentators regard the the passage of the
1934 Indian Reorganization Act as an indication of a
shift in federal policy away from assimilation and to-
wards the re-recognition of Indian tribes. While Com-
missioner of Indian Affairs John Collier, who wrote the
proposal which formed the basis for the new law, was a
visionary reformer, he was not in tune with congres-
sional sentiment. Congress drastically altered Collier's
original bill. In the view of most members of Congress,
the Indian Reorganization Act was an ambiguous stat-
ute which was largely consistent with previous attempts
to "prepare" Indians for incorporation into the United
States.
By the spring of 1934 it had become clear that some
form of federal action was required to assist Native
Americans. The ravages of the Depression only ampli-
fied the poverty of Indian communities. Not only were
levels of Indian health care, education and income a
51
fraction of the non-Indian average, but the economic
devastation of the allotment system had become vividly
clear. Between 1887 and 1934 the amount of land in
Indian hands had shrunk from 136 million acres to 34
million acres. Of this 102 million acre loss, 40 million
acres had gone to tribal members in the form of allot-
ments; the rest had been acquired by non-Indian set-
tlers. Of the 40 million acres of allotted lands, less than-
half— 17.5 million acres— was still owned by Native
Americans at the beginning of the Roosevelt Adminis-
tration. 41
John Collier's proposal called for an end to all future
allotments, but it went far beyond a simple repeal of
the Dawes Act. His draft bill granted the tribes substan-
tial political power. He wanted them to organize under
charters and to function as "federal municipal corpora-
tions." Under his plan, these corporations would ac-
quire all allotments on the death of their current
owners, would take over responsibility for administering
many federal services within the reservation, would op-
erate courts and would have the power to compel the
transfer of government officials from the reservation. In
the words of a modern scholar, "self-government virtu-
ally leaped from every page" of the document. 42
In hearings before Senate and House Committees,
Collier emphasized the economic advantages to be de-
rived from ending allotment and downplayed the bill's
endorsement of tribal governments. This was wise, for
his audiences were openly hostile to the Commissioner's
wider ambitions. Senator Burton Wheeler, Chairman of
the Senate Committee, declared, for example, that the
original bill contained "a lot of propaganda and verbi-
age" and urged Collier to simplify it. He objected as
well to the bill's implication that the new tribal organi-
zations would become permanent representatives of
Indian communities. As he said in one exchange with
the young Commissioner, "What we are trying to do is
get rid of the Indian problem rather than add to it." 43
Wheeler's sentiments are reflected in the law Con-
gress enacted on June 18, 1934. The Indian Reorganiza-
tion Act declared an end to the policy of allotment, but
it severely restricted the powers and the autonomy of
the new tribal governments which would operate under
its authority. All tribal constitutions would require the
approval of the Secretary of the Interior; tribal govern-
52
ments would not have the power to compel the return
of allotments to tribal ownership, nor would they be
able to force the transfer of government officials or op-
erate courts apart from the existing ones authorized by
the Bureau of Indian Affairs. The established federal
bureaucracy would remain, powerful and intact. The
Indian Reorganization Act did contain appropriations
for education and economic development, but the school
funds were to be used primarily in vocational training
and the tribes were not granted the power to organize
as municipal corporations. 44
While modern commentators have observed that with
the I.R.A. "Collier got only half his cake," a legislative
perspective suggests that he may have gotten even less
than that. The Senate and House Indian Affairs Com-
mittees, dominated by representatives of western states,
were decidedly unsympathetic to the political reforms
contained in the new law. Nevertheless, the Indian Re-
organization Act created the possibility for important
changes in the decades ahead. 45
John Collier's influence gradually subsided during his
remaining eleven years in office. As tribal governments
were organized and began to function, the Congressmen
and Senators who had supported Collier's reforms
began to oppose him. In fact, the investigative subcom-
mittee of the Senate Indian Affairs Committee, which
had begun under Lynn Frazier in 1928, continued to
meet throughout the 1930's and became a forum for
airing complaints against Commissioner Collier. The
high point of these efforts came in the spring of 1937,
when an entire set of hearings was devoted to the fail-
ings of the current BIA administration. During this
event, O.K. Chandler, a Cherokee leader of the Ameri-
can Indian Federation, called for the Commissioner's re-
moval because of his "atheism, communism, and un-
Americanism in the administration of the Bureau of
Indian Affairs." This opposition continued, but Collier-
remained— embattled— until 1945. In 1944 the Senate
Indian Affairs Committee approved a bill to repeal the
Indian Reorganization Act, but the Senate never acted
on it. 46
Despite their inability to rescind the Indian Reorgani-
zation Act, Collier's opponents gained support for termi-
nating all federal support for Indian tribes during the
immediate postwar years. A number of specific adminis-
53
trative reforms supported this trend. In 1946 Congress
responded to the growing number of tribes who wished
to file suit against the federal government in the Court
of Claims by creating the Indian Claims Commission, a
quasi-judicial body that would hear complaints and rec-
ommend settlements. While the commission promised
Indians a forum for their grievances, it also promised to
settle all outstanding disputes quickly and to extinguish
all claims against the United States. Similarly, a reor-
ganization of the Bureau of Indian Affairs in 1947 cre-
ated a series of area offices and decentralized many ac-
tivities. While the stated purpose of the effort was to in-
crease efficiency, it supported the idea that BIA func-
tions should be scaled back or ended.
Placed on the defensive by nearly a half-century of at-
tacks from impatient legislators, the Bureau of Indian
Affairs began to echo its critics' arguments. In 1947, for
example, while testifying before the Senate Committee
on Civil Service, Assistant Commissioner William Zim-
merman was asked how the BIA might reduce its ex-
penses. Zimmerman declared that reducing the number
of tribes served by the Bureau would save money; he
even produced a list of tribes which could survive with-
out federal financial support immediately. 47 In May
1950, one of Collier's critics, Dillon S. Myer, became
Commissioner of Indian Affairs. As the former director
of the War Relocation Authority, which supervised the
internment of Japanese evacuees during World War II,
Myer had no background in Indian affairs and little
sympathy for tribal communities. His replacement in
the Eisenhower administration, Glenn L. Emmons, a
banker from Gallup, New Mexico eagerly continued
Myer's policies.
The high point of termination came in the summer of
1953 when Congress adopted House Concurrent Resolu-
tion 108 and Public Law 280. The preamble to the
House Concurrent Resolution noted that "the Indians
within the territorial limits of the United States should
assume their full responsibilities as American citizens,"
and this sentiment pervaded the remainder of the docu-
ment. It promised to "free from federal supervision" a
number of small tribes in California, Florida, New York
and Texas and to pursue the termination of others in
Montana, North Dakota, Wisconsin and Kansas. Public
Law 280 replaced tribal jurisdiction with state jurisdic-
54
tion in criminal prosecutions arising on most Indian
reservations in California, Minnesota, Nebraska,
Oregon and Wisconsin. These two laws, and the specific
termination of 12 tribes between 1954 and 1962, seemed
to indicate that the federal commitment to tribes would
continue to deteriorate for the remainder of the twenti-
eth century. There was nothing in these statutes to
signal the resurgence of tribes which would characterize
legislative and administrative life in the 1960's.
THE ERVIN AND KENNEDY HEARINGS
Most Congressmen and Senators who discussed Indian
affairs in the twentieth century assumed tribal commu-
nities would soon disappear, but by 1960 it had become
obvious that the United States contained very few
"Vanishing Americans." In 1900, the U.S. Indian popu-
lation began to rise for the first time since 1492; by 1960
the census reported 523,000 Native Americans, up 47
percent from 1950. Equally important, Indian communi-
ties continued to occupy a visible place in the American
social scene. Reservations, of course, were distinctive,
but Indian neighborhoods were also visible in cities and
in small towns. And despite the restrictions placed on
tribal governments by government officials, policymak-
ers in the 1950's were encountering a growing, and in-
creasingly sophisticated, cadre of Indian leaders as they
considered new initiatives.
When legislators encountered Indian leaders in the
1950's it was usually in the context of opposition to ter-
mination. Led by the National Congress of American In-
dians, an intertribal group formed in 1944, Indian lead-
ers expressed remarkable unanimity on the issue. The
goals of assimilation and termination had rested on the
assumption that Indians ultimately wanted the same
things as other Americans and that their "uplift" would
cause them to disappear into the American melting pot.
This assumption was contradicted by the persistence of
native traditions in the twentieth century, and by the
Indians' repeated insistence on recognition as a tribal
people. In the spring of 1961, as a new administration
took office in Washington, a gathering of over 400
Native American leaders from 67 tribes met in Chicago
and issued a statement which renewed this appeal:
55
The answers we seek are not commodities to
be purchased . . . When Indians speak of the
continent they yielded, they are not referring
only to the loss of some millions of acres in real
estate. They have in mind that the land sup- \
ported a universe of things they knew, valued,
and loved.
With that continent gone, except for the few
poor parcels they still retain, the basis of life is
precariously held, but they mean to hold the
scraps and parcels as earnestly as any small
nation or ethnic group was ever determined to
hold to identity and survival.
What we ask of America is not charity, not
paternalism, even when benevolent. We ask
only that the nature of our situation be recog-
nized and made the basis of policy and
action. 48
It was in this context that two Senate Committees set
out to investigate aspects of tribal life during the 1960's.
In 1961 the Senate Judiciary Committee authorized Sen-
ator Sam J. Ervin of North Carolina to conduct a series
of hearings on the constitutional rights of American In-
dians. Fueled by a mixture of sympathy for Indians and
a concern that the contemporary civil rights movement
was paying too much attention to his native South and
ignoring "the minority group most in need of having
their rights protected," Ervin embarked on this project
with the goal of bringing tribal governments in line
with the United States Constitution. The focus of his
concern were the tribal courts, institutions which had
been created originally by the Bureau of Indian Affairs
to maintain "law and order" on the reservations. 49
In four years of intermittent hearings Ervin produced
ample evidence that tribal courts did not conform to
legal practice. Defendants were rarely advised of their
rights or represented by lawyers, and tribal judges had
little formal training. But Ervin also learned that local
BIA officials either manipulated or ignored the institu-
tion's proceedings, and that states such as California
and Minnesota which had been given jurisdiction over
Indian reservations under Public Law 280 had either
discriminated against, or ignored, native communities.
The constitutional rights of Indians appeared to have
56
been violated by state and federal authorities as well as
by the tribes. 50
In 1965 Senator Ervin introduced nine bills to ' 'pro-
vide our Indian citizens with the rights and protections
conferred upon all other American citizens." The North
Carolina legislator's proposals focused primarily on re-
forms which served to bring tribal governments in line
with the United States Constitution. He wanted tribal
government actions to be subject to the same limita-
tions as those imposed on the federal government, and
he wanted defendants to be allowed to appeal tribal
court convictions to federal courts. But equally signifi-
cant, Ervin also recognized the failures of the states and
the BIA. He proposed that no more states be granted
criminal jurisdiction over Indian reservations without
tribal consent, and that federal officials take steps to
improve the administration of justice on the reserva-
tions. 51
While superficially appealing, Ervin's blanket ap-
proach to tribal court reform brought forth resistance
from the Interior Department and many tribes. Interior
Solicitor Frank J. Barry, for example, pointed out to the
Senator that "the people of Indian tribes have their
roots in an entirely different culture." For example, the
15th amendment— which guaranteed voting privileges
without regard to race — would present problems for
tribes which typically decided citizenship on the basis of
one's degree of Indian ancestry. Procedural guarantees
such as a defendant's right to counsel or a jury trial
would also place financial strains on the tribal courts. 52
Ervin's bills were debated off and on from 1965 to
1968, years when the nation at large was deeply in-
volved in issues of civil rights and the recognition of mi-
nority peoples. In this setting it was difficult for Con-
gress to overlook or ignore criticisms voiced by Indians
and BIA officials. Moreover, as the discussion pro-
gressed, the subject shifted subtly from the issue of how
to "improve" tribal courts and governments, to how the
federal government might reform these institutions
while demonstrating its sensitivity to the continuing vi-
ability of Indian cultures. Thus, when Ervin's bills won
Congressional approval as the Indian Civil Rights Act of
1968, it contained a number of provisions important to
tribal leaders and Native American activists.
57
Rather than issue a blanket requirement that tribes
conform to the U.S. Constitution, the Indian Civil
Rights Act listed ten specific limitations on the power of
tribal governments. It also amended Public Law 280, re-
quiring tribes to consent to any further extensions of
state jurisdiction over them, ordered the BIA to create a
model code for the administration of justice on reserva-
tions, and stipulated that tribal contracts for legal coun-
sel would be automatically approved unless they were
cancelled by the Secretary of the Interior within 90
days of being signed. Recognizing that some Indian gov-
ernments are theocratic, the law also exempted tribes
from the constitutional prohibition against the estab-
lishment of religion. In addition, concern for the tribe's
cultural traditions and their small budgets led to an ex-
emption from the requirement of free legal counsel for
indigent defendants, and the requirement that civil
cases be tried before a jury. The new law and its pas-
sage indicated that Congress had moved away from the
anti-tribal assumptions of the 1940's and 1950 s. 53
In August, 1967, at precisely the same time that legis-
lators and lobbyists were debating Senator Ervin's pro-
posals for the reform of Indian courts, another Senate
investigation of Indian affairs was getting underway.
While seemingly unrelated to the Ervin inquiry, Sena-
tor Robert F. Kennedy's investigation of Indian educa-
tion, conducted by the Subcommittee on Indian Educa-
tion of the Committee on Labor and Public Welfare,
began with similar motivations. Just as Ervin wanted to
show that Indians were being ignored by liberals who
wanted to reform race relations in the South, so Kenne-
dy (who was contemplating a bid for the Presidency)
wanted to demonstrate that Lyndon Johnson's vaunted
War on Poverty had missed a significant group in
American society. And as with Ervin's investigation,
Kennedy's inquiry (completed by his brother Edward in
1969) revealed a growing acceptance of tribal govern-
ments and tribal communities as permanent features of
Indian life. In fact, just as the Ervin Committee eventu-
ally produced legislation which strengthened and legiti-
mized tribal courts, so the Kennedy Committee opened
the way to tribally-controlled schools. 54
A week after the Indian Civil Rights Act cleared the
Senate, the Kennedy Committee held its first hearing.
During the next 18 months it conducted extensive
58
public hearings and staff interviews. Specifically, the
committee staff evaluated the educational programs at
fourteen schools in New Mexico, Montana, Oklahoma,
South Dakota, Kansas, Utah, Alaska, Arizona, Califor-
nia and Nevada. Moreover, the Committee commis-
sioned five studies of different aspects of Indian school-
ing which were included in its final report.
The Kennedy Committee organized its findings into
three areas. First, after reviewing the history of Indian
education, it concluded that "the dominant policy of the
Federal Government . . . has been one of coercive as-
similation." This policy, the Committee reported, had
resulted in poverty, social disorganization, waste and
"the growth of a large, ineffective and self-perpetuating
bureaucracy." Second, the panel's investigation of
Indian schooling in public institutions supported the
conclusion that these schools were neither sensitive to
Indian needs, responsive to Indian parents, or governed
by school boards representative of the native population
within the community. Third, the Committee found that
federally supported schools were poorly funded, ineffec-
tive, and misguided. "Teachers and administrators in
Federal Indian schools," the Committee wrote, "still see
their role as one of 'civilizing the native/ ' 55
The Kennedy Committee made sixty recommenda-
tions, including the creation of a Senate Select Commit-
tee on the Human Needs of the American Indian, the
convening of a White House conference on American
Indian Affairs, increased funding for culturally sensi-
tive curricula, and greater supervision of state and local
officials who receive federal funds for the education of
Native Americans in the public schools. "One theme
running through all our recommendations," the Com-
mittee concluded, "is increased Indian participation and
control of their own educational programs. For far too
long, the Nation has paid only token heed to the notion
that Indians should have a strong voice in their own
destiny." 56
While L. Madison Coombs, Director of Educational
Research at the Bureau of Indian Affairs, labeled the
bleak findings of the Kennedy report "unbelievably neg-
ative," the Committee's call for greater Indian partici-
pation in school administration found general support.
Combining a concern for minority cultures, effective tes-
timony from Indian people, and an acute sense that cur-
59
rent programs simply did not educate the people they
were supposed to serve, the authors of the Committee
report presented a persuasive argument for a new de-
parture in federal policy. As a recent study of the histo-
ry of Indian education concludes, the Kennedy Commit-
tee opened the possibility of a system of education "re-
sponsive to Indian needs and amenable to Indian con-
trol — a development counter to a century of tradition."
The Indian Education Act of 1972 represented a con-
gressional endorsement of the Kennedy Committee's
findings. The new law required public school districts to
involve parents and community members in the admin-
istration of federal funds for Indian children. Three
years later Congress went farther by approving the
Indian Self-Determination and Education Assistance
Act which added new requirements for Indian involve-
ment in public school programs receiving federal funds.
Additional amendments to these reforms were passed in
1978, all of which promoted the idea of greater commu-
nity control in Indian schooling. 57
Legislative sympathy for self-determination in the
tribal courts and in Indian education did not, of course,
occur in a vacuum. 1969 marked the beginning of a
decade of Indian activism: the peaceful occupation of Al-
catraz, the sometimes violent confrontation at Wounded
Knee, South Dakota, the fishing disputes in Puget
Sound, and countless other, less well-publicized inci-
dents across the country reflected a growing willingness
on the part of Indian people to demand recognition as
distinctive communities within the United States. The
U.S. Supreme Court was also a forum for these issues.
The Court announced twelve decisions in Indian law
during the 1960's; during the 1970's it announced thirty-
five, including decisions recognizing tribal fishing rights
in the Northwest, agreeing to tribal exemptions from
some forms of state taxation, accepting the tribal power
to determine its own membership, and spelling out the
sovereign status of tribal courts. 58
The Ervin and Kennedy committees had discovered
that federal efforts to dismantle tribes and their legal
status had done more harm than good. Without their
own courts, Indians had great difficulty managing their
communities and resolving internal conflicts. Without
community control, federal schools seemed to devolve
into bureaucratic, authoritarian holding tanks, and
60
public education became both alien and ineffective.
Moreover, this reasoning could be extended to housing,
health care and other social services. A variety of ethi-
cal, political and practical concerns had driven legisla-
tors, government administrators and the general public
away from termination and assimilation and had
brought them back, full circle, to an acceptance of tribal
communities as a permanent part of the American
landscape.
The Beginnings of Self-Determination
Congress's new commitment to self-determination was
reflected by passage in January, 1975 of Public Law 93-
638, the Indian Self-Determination and Education As-
sistance Act. Declaring a desire for "maximum Indian
participation/ ' in programs that would be "responsive
to the needs and desires" of native communities, the act
granted tribes the power to sign contracts with federal
agencies to administer government programs. The
tribes responded eagerly to this new opportunity; five
years after its passage, 370 contracts were in effect, pro-
viding $200 million worth of services to Indian people.
While limited by provisions which allowed federal agen-
cies to retain ultimate authority over the approval of
these contracts, P.L. 93-638 represented an explicit de-
parture from a century of assimilationist policymaking.
Rather than dismantling tribes and individualizing
Native American communities, Congress had now recog-
nized that these social and cultural entities were the
basis of modern Indian life.
The years since 1975 have been marked by substan-
tial controversy. Indian politicians, commentators and
community leaders have charged that the self-determi-
nation legislation of the 1970's was an empty promise.
Red tape and the perpetuation of federal bureaucracies,
inadequate authority, and condescending attitudes have
restricted Native American efforts to take control of
their communities. In this view even "successful" tribal
leaders are simply puppets for non-Indians. The Chero-
kee Professor of Law Rennard Strickland has said, for
example:
The Indian leader has figured out both how to
manipulate, and yet is being manipulated by
the . . . bureaucrats. . . . Today the Indian is
61
in another medicine show — one where he is not
given rations but one where he is given per
diem, and plane tickets, and 'programs to
manage.' And in the process the administrator
and the administered feed upon each other. 59
Commentators like Strickland have focused their attack
on federal administrators and their congressional pro-
tectors, arguing that these people support self-determi-
nation with rhetoric while working to insure the growth
of the existing bureaucracy.
Mirroring these charges is an opposite view that
tribal groups have received an unfair and unrealistic
amount of government assistance. Led by "backlash" or-*
ganizations that have frequently formed in response to
litigation (such as the Puget Sound fishing rights con-
troversy), this camp rejects what it considers to have
been the drastic reforms of the 1970's, and urges a
return to the philosophy of termination. Its advocates
argue, in the words of former Washington Congressman
Lloyd Meeds, that Indians are trying to "convert tribal
political aspirations into legal doctrine." These views
have entered the congressional arena most prominently
in a series of proposals to abrogate treaty-guaranteed
fishing rights or to end federal support for native
people. 60
Despite the existence of these sharply contrasting
views, congressional committees and the Congress itself
have held consistently — and cautiously — to self-determi-
nation as a policy objective. While attacked by some for
having moved too quickly, and by others for not having
moved at all, legislators have held to a remarkably
steady course. In 1975, at the urging of South Dakota
Senator James Abourezk, Congress created the Ameri-
can Indian Policy Review Commission. Its 1977 final
report drew criticism from both Indian-advocates and
terminationists, but its ten volumes of work symbolized
congressional concern for the future of tribal communi-
ties and kept Indian issues before the public. In 1977
the Senate reestablished its Select Committee on Indian
Affairs to oversee legislation affecting native people. In
1976 the Indian Health Care Improvement Act extended
the ideas of the 1975 Self-Determination Act to a new
area of tribal services by encouraging native organiza-
tions to manage their own clinics and hospitals. Other
62
legislation has built on these precedents by recognizing
new tribal institutions and activities. The Tribally-Con-
trolled Community College Assistance Act (P.L. 95-471)
has supported the development of higher education
within Indian communities, and the Indian Child Wel-
fare Act (P.L. 95-608) gave tribes the authority to super-
vise adoptions involving their members. 61
The increasing authority granted tribal governments
to administer their own programs, the rise of tribally-
controlled colleges and the broad reach of the Indian
Child Welfare Act indicate that policymaking since 1975
has turned on a recognition of the viability and endur-
ing value of tribal life.
Conclusion
While congressional investigations have been central
to Indian policymaking for two hundred years, members
of Congress often have not considered the context in
which their work has taken place. Pressed by immedi-
ate crises and political agitation, congressional investi-
gations have tended to focus on concerns of the moment
rather than long-term goals. As a result, inquiries have
frequently devolved into partisan contests or superficial
tinkering with flawed programs. The constant re-tinker-
ing, restructuring and reorganization failed to deal with
profound problems. Also, for most of our history, par-
ticularly since the late nineteenth century, congression-
al investigations have sprung from a belief that Indian
tribes are no more than a temporary feature of Ameri-
can social life. The results of these inquiries have there-
fore often been hostile to the wishes and interests of
Native American communities.
In 1989 congressional investigators have the advan-
tage of understanding that we are at the beginning of a
new era in Indian policymaking. For the first time in
nearly two centuries, a congressional inquiry has oc-
curred in an atmosphere of support for tribal self-deter-
mination. Moreover, the Special Committee on Investi-
gations has sought to understand the relationship be-
tween administrative problems and the long-range goal
of self-determination. Understanding this context, Con-
gress has an opportunity to build on the sequence of the
past by using the findings of our current investigation
to fulfill the promise of Indian self-government within
the United States.
ENDNOTES
A BRIEF HISTORY OF CONGRESSIONAL INVESTIGATIONS
AND AMERICAN INDIAN AFFAIRS FROM 1789 TO 1989
1 U.S. Constitution, Article II, Section 2. "The Constitution, by
declaring treaties already made, as well as those to be made, to be
the supreme law of the land, has adopted and sanctioned the previ-
ous treaties with the Indian nations, and consequently admits their
rank among those powers who are capable of making treaties."
Worcester v. Georgia, 31 U.S. (6 Pet.) 515, 559 (1832) (Chief Justice
Marshall). See also Antoine v. Washington, 420 U.S. 194, 202-03
(1975) (holding that 1891 Agreement between United States and
Colville Confederated Tribes ratified by Congress has same legal
force as treaty); U.S. Congress, House, Report with Respect to the
House Resolution Authorizing the Committee on Interior and Insu-
lar Affairs to Conduct an Investigation of the Bureau of Indian Af-
fairs, 82nd Cong., 2d sess., Dec. 15, 1952, H. Rept. 2503 at pp. 727-
1031. See e.g., Choate v. Trapp, 224 U.S. 665 (1912) (holding that
Agreement between the United States and the Choctaw and Chick-
asaw Tribes ratified by Congress in 1898 has the same effect as any
treaty and thus is the supreme law of the land); Perrin v. United
States, 232 U.S. 478 (1914) (Same; 1894 Agreement); Winters v.
United States, 207 U.S. 564 (1907) (Same; 1872 Agreement). See also
Dick v. United States, 208 U.S. 340, 359 (1907) (Agreement between
United States and Nez Perce Indians ratified by Congress in 1894
was valid law "based upon the treaty-making power of the United
States"); Elk v. Wilkins, 112 U.S. 94, 107 (1884) (Same).
2 Linda Grant DePauw, ed., Senate Executive Journal and Relat-
ed Documents (Baltimore: Johns Hopkins University Press, 1974),
Vol. I at p. 3.
3 Id. at p. 31.
4 Annals of the Congress of the United States (Washington, D.C.),
Vol. I at pp. 66-72.
5 Id. at p. 81.
6 American State Papers: Indian Affairs, Vol. I at pp. 13-14.
7 Annals of Congress, Vol. Ill at p. 493.
8 For a description of the inquiry itself, see Arthur M. Schlesin-
ger Jr. and Roger Bruns, Congress Investigates (New York: Chelsea
House, 1974), Vol. I at pp. 3-17.
9 Comments of Representative John Steele of North Carolina,
Annals of Congress, Vol. Ill at pp. 491-92.
10 See e.g., the Senate Committee on Indian Affairs report on the
factory system, submitted in April 1820. The committee admitted
the difficulty of policing the Indian trade and excluding liquor sell-
ers from tribal territories, but concluded that it would be "ine. pe-
dient to abolish the present system of Indian trade as it is now es-
(63)
64
tablished by law." American State Papers: Indian Affairs, Vol. II at
pp. 203-04.
1 1 Report of the Committee on Public Lands on the Importance of
Exchanging Indian Land for Public Land in the West, American
State Papers: Indian Affairs, Vol. II at p. 124.
12 John C. Calhoun to House of Representatives, Jan. 15, 1820, in
American State Papers: Indian Affairs, Vol. II at pp. 200-01.
13 U.S. Congress, Senate, On Indian Affairs, 21st Cong., 1st sess.,
1830, S. Doc. 61 (Serial 193).
14 The Marshall decisions on Cherokee removal are the subject of
a vast literature. For two recent commentaries, see Charles Wilkin-
son, American Indians, Time and the Law (New Haven: Yale Uni-
versity Press, 1987) at pp. 54-57; and Milner S. Ball, "Constitution,
Court, Indian Tribes," American Bar Foundation Research Journal,
Vol. 1987, no. 1 (Winter 1987) at pp. 23-24.
15 Secretary of the Treasury Robert J. Walker, quoted in Francis
Paul Prucha, The Great Father: The United States Government and
the American Indians (Lincoln: University of Nebraska Press,
1984), Vol. I at p. 321.
16 The 1851 reorganization was authorized by the 31st Congress
and is contained in United States Statutes at Large, Vol. 9 at pp.
586-87. The impact of national expansion on the Indian Office is
discussed in Prucha, The Great Father, Vol. I, Chapter 12.
17 Annual Report of the Commissioner of Indian Affairs, 1856 at
pp. 571-75.
18 The first investigation of Sand Creek was conducted by Sena-
tor Benjamin F. Wade of the powerful Joint Committee on the Con-
duct of the War. His report is in S. Rep. 142, 38th Cong., 2d sess.,
Senate Reports (Serial 1214). The second investigation was conduct-
ed by General Samuel F. Tappan and is contained in S. Exec. Doc.
26, 39th Cong., 2d sess., Senate Executive Documents (Serial 1277).
Both reports condemned the militia units that attacked the Chey-
enne.
19 U.S. Congress, Senate, Report of the Joint Special Committee,
January 26, 1867, 39th Cong., 2d sess., S. Rept. 156.
20 Id., Appendix at pp. 14, 29, 425, 439.
21 Id. at pp. 3, 5-9.
22 Id.
23 U.S. Congress, House, Report of the Indian Peace Commission-
ers, January U, 1868, 40th Cong., 2d sess., 1868, H. Exec. Doc. 97;
James D. Richardson, comp., Messages and Papers of the Presidents,
Vol. 7 at pp. 109-10.
24 The story of the 1871 appropriations rider is the subject of
John R. Wunder's "No More Treaties: The Resolution of 1871 and
the Alteration of Indian Rights to their Homelands," in John R.
Wunder, ed., Working the Range: Essays on the History of Western
Land Management and the Environment (Westport, CT: Greenwood
Press, 1985) at pp. 39-56. Some of the tensions over treatymaking
can be discerned in a report submitted to the Senate Committee on
Indian Affairs in the spring of 1870 by the Interior Department. In
it, Commissioner of Indian Affairs Ely S. Parker argued that it was
of "the utmost importance" to realize that "a strict and faithful ob-
servance of all the Indian treaties should be maintained by the gov-
ernment, in order to avoid the evils and horrors incident to, as well
65
as the expense attendant upon, a general Indian war." See Letter,
Secretary of the Interior to the Chairman of the Committee on
Indian Affairs of the Senate, Apr. 29, 1870, 41st Cong., 2d sess., S.
Misc. Doc. 136 (Serial 1408).
25 Helen Hunt Jackson, A Century of Dishonor, Harper Torch-
book Edition (New York: Harper and Row, 1965, originally pub-
lished in 1881) at p. 31.
26 U.S. Congress, House, Transfer of the Indian Bureau from In-
terior to the War Department, 45th Cong., 2d sess., H. Rept. 241
(Serial 1822); U.S. Congress, Senate, Testimony Taken by Committee
Appointed to Consider the Expediency of Transferring the Indian
Bureau from the Interior Department to the War Department, 45th
Cong., 3rd sess., S. Misc. Doc. 53 (Serial 1835). The following year a
special Senate committee investigated the causes of the Northern
Cheyenne "escape" from Indian Territory and the subsequent
fighting at Fort Robinson, Nebraska. The Republican-dominated
committee issued a report sympathetic to the tribe and critical of
the military. U.S. Congress, Senate, 46th Cong., 2d sess., S. Rept.
708 (Serial 1899).
27 A description of the crisis atmosphere of 1880 and the emer-
gence of a consensus on future directions in policy can be found in
Frederick E. Hoxie, A Final Promise: The Campaign to Assimilate
the Indians, 1880-1920 (Lincoln: University of Nebraska Press,
1984), Chapters 1-2.
28 U.S. Congress, Senate, Investigation of Condition of Indians in
the Indian Territory, 49th Cong., 1st sess., S. Rept. 1278, Part 1,
June 4, 1886 at pp. ii, xiii, and Part 3 at p. xiv.
29 Quoted in Hoxie, A Final Promise at p. 72.
30 Quoted in Hoxie, A Final Promise at p. 149.
31 Hoxie, A Final Promise at p. 153; Donald J. Berthrong, The
Cheyenne and Arapaho Ordeal: Reservation and Agency Life in the
Indian Territory, 1875-1907 (Norman: University of Oklahoma
Press, 1976) at pp. 148-91.
32 Quoted in Hoxie, A Final Promise at p. 155.
33 U.S. Congress, Senate, Investigation of Indian Traders, 50th
Cong., 2d sess., Mar. 2, 1889, S. Rept. 2710 (Serial 2624) at p. i; U.S.
Congress, Senate, Osage Indian Funds, 54th Cong., 2d sess., Jan 26,
1897, S. Rept. 1336 at pp. 1-5.
34 U.S. Congress, House, Joint Commission to Investigate Indian
Affairs, 63rd Cong., 3rd sess., Mar. 2, 1915, H. Doc. 1669 (Serial
6889) at p. 5.
35 U.S. Congress, House, Indians of the United States, Field In-
vestigation, 66th Cong., 3rd sess., H. Rept. 1133 at pp. 1-18.
36 Quoted in Hoxie, A Final Promise at p. 182.
37 U.S. Congress, House, Resolution of Committee on One Hun-
dred Appointed by Secretary of Interior and Review of Indian Prob-
lem, 68th Cong., 1st sess., H. Doc. 149 (Serial 8273) at p. 1.
38 Lewis Meriam et al, The Problem of Indian Administration
(Baltimore: Johns Hopkins University Press, 1928) at p. 89.
39 U.S. Congress, Senate, Hearings on Senate Resolution 341, 69th
Cong., 2d sess. at p. 10.
40 U.S. Congress, Senate, 70th Cong., 1st sess., S. Res. 79.
4 1 These numbers are rounded totals drawn from Leonard A.
Carlson, "Federal Policy and Indian Land: Economic Interests and
66
the Sale of Indian Allotments, 1900-1934," Agricultural History,
Vol. 57, no. 1 (Jan., 1983) at pp. 33-45; and David M. Holford, "The
Subversion of the Indian Land Allotment System, 1887-1934,"
Indian Historian, Vol. 8 (Spring 1975) at p. 18.
42 Vine Deloria, Jr. and Clifford M. Lytle, The Nations Within:
The Past and Future of American Indian Sovereignty (New York:
Pantheon Books, 1984) at pp. 68, 71.
43 Id. at p. 124; Quoted in Alvin M. Josephy, Jr., "Modern Amer-
ica and the Indian," in Frederick E. Hoxie, ed., Indians in Ameri-
can History (Arlington Heights, IL: Harlan Davidson, 1988) at p.
251.
44 Indian Reorganization Act of 1934, codified as amended at 25
U.S.C. § 461 et seq.
45 Prucha, The Great Father, Vol. II at p. 962.
46 U.S. Congress, Senate, Subcommittee of the Committee on
Indian Affairs, Hearings on the Survey of Conditions of the Indian
in the United States, 76th Cong., Part 37 at p. 20496.
47 This incident is described in Prucha, The Great Father, Vol. II
at p. 1026. The hearings are contained in Officers and Employees of
the Federal Government, Hearings before the Committee on Civil
Service on S. Res. 41, U.S. Senate, 80th Cong., 1st sess., 1947.
48 "Declaration of Indian Purpose," June, 1961, quoted in
Prucha, Documents of United States Indian Policy at p. 246.
49 Donald L. Burnett, Jr., "An Historical Analysis of the 1968
'Indian Civil Rights' Act," Harvard Journal on Legislation, Vol. 9,
no. 4 (May 1972) at p. 575. A history of the tribal courts can be
found in William T. Hagan, Indian Police and Judges (Norman:
University of Oklahoma Press, 1966).
50 Burnett at pp. 577-89.
51 U.S. Congress, Senate, Subcommittee on Constitutional Rights,
Committee on the Judiciary, Constitutional Rights of the American
Indian, 89th Cong., 1st sess. at pp. 1-2; Burnett at pp. 589-601.
52 Constitutional Rights of the American Indian at p. 17.
53 The Indian Civil Rights Act is Title II of the Civil Rights Act
of 1968; US. Statutes At Large, Vol. 82 at pp. 77-81.
54 "After more than a century of Federal paternalism," the
Senate Report urging the creation of the committee declared,
"some 400,000 American Indian citizens remain trapped in a web
of illiteracy and poverty." U.S. Congress, Senate, Report of the
Senate Special Subcommittee on Indian Education, Indian Educa-
tion: A National Tragedy — A National Challenge, 91st Cong., 1st
sess., S. Rept. 91-501 at pp. 2-3.
55 Id. at pp. 21, 52, 99-100 and Appendix I.
56 Id. at pp. xtii-xiv.
67 Quoted in Prucha, The Great Father, Vol. II at p. 1104; Marga-
ret Connell Szasz, Education and the American Indian: The Road
to Self-Determination, 1928-1973 (Albuquerque: University of New
Mexico Press, 1974) at p. 196; P.L. 92-318; Prucha, The Great
Father, Vol. II at pp. 1144-46; US. Statutes, Vol. 88 at pp. 2213-17;
P.L. 95-561.
58 See Washington v. Washington State Commercial Passenger
Fishing Vessel Association, 443 U.S. 658 (1979); McClanahan v. Ari-
zona State Tax Commission, 411 U.S. 164 (1973); Santa Clara
Pueblo v. Martinez, 436 U.S. 49 (1978); and U.S. v. Wheeler, 435 U.S.
67
313 (1978). For a listing of all U.S. Supreme Court decisions in
Indian law from 1959 to 1985, see Wilkinson at pp. 123-132.
59 Al Logan Slagle, "The American Policy Review Commission:
Repercussions and Aftermath," in Anthony Brown, New Directions
in Federal Indian Policy: A Review of the American Indian Policy
Review Commission (Los Angeles: American Indian Studies Center,
University of California, 1979) at p. 124.
60 Quoted in Prucha, The Great Father, Vol. II at p. 1205.
6 f Edmund Danziger, "A New Beginning or the Last Hurrah:
American Indian Response to the Reform Legislation of the 1970s,"
American Indian Culture and Research Journal, Vol. 7, no. 4 (1984)
at pp. 74-77; Mississippi Band of Choctaw v. Holyfield, 109 S. Ct.
1597 (1989).
PART THREE
CHAPTER 1
ECONOMIC DEVELOPMENT AND INDIAN
PREFERENCE CONTRACTING
In an attempt to stimulate the growth of Indian busi-
nesses and reservation economies, Congress in 1910 en-
acted the Buy Indian Act, creating a concept called
"Indian preference" in contracting. The purpose of
Indian preference in contracting is to provide Indian-
owned businesses with an advantage over non-Indian
businesses in bidding for government contracts, such as
housing and road construction, which ultimately benefit
American Indians. The success of independent, Indian-
owned and controlled enterprises would, Congress be-
lieved, promote Indian economic development. 1
Instead, the Indian preference program has merely
fostered the growth of established non-Indian contrac-
tors. The Committee found that 19 of the largest so-
called "Indian" contractors were in fact controlled by
non-Indians who drained the Indian businesses of their
profits. Rather than promote the growth of Indian busi-
ness, the program profited those large non-Indian con-
tractors ready to defraud the federal government and
Indian tribes.
The federal agencies that administer the over $200
million a year program — including the Bureau of Indian
Affairs (BIA), the Department of Housing and Urban
Development (HUD), and the Small Business Adminis-
tration (SBA)— have totally failed to catch and deter the
fraud that has corrupted their programs. Despite re-
peated warnings, these agencies tolerated the cancer of
Indian fronts for decades.
Some Examples of Indian Preference Abuse
The Committee found that 19 of the largest so-called
Indian companies were in fact "fronts," ranging from
those which were simply sham companies to functioning
(6»)
70
businesses whose profits and bonding were secretly con-
trolled by non-Indians. The following case studies are
examples demonstrating how and why fronts have come
to dominate contracts the federal government lets for
Indian work. 2
NATIVE AMERICAN CONSTRUCTION, INC.
In the late 1970's federal agencies, including BIA and
HUD, began increasingly to use Indian preference when
letting contracts on Indian reservations. John Paddock
was one of the largest construction contractors in Arizo-
na, particularly active on Indian lands, and he soon re-
alized that bidding for Indian contracts was becoming
more restricted to so-called Indian businesses. 3
Paddock approached Don James, a Navajo carpenter,
and established Native American Construction, Inc., lo-
cated in Marana, Arizona, with James as its sole stock-
holder. Despite its name, the company's bidding was
never controlled by Native Americans, nor were Native
Americans hired to perform the work on construction
contracts awarded to the company. And it certainly was
not Native Americans who kept the books or reaped the
profits from numerous Indian preference contracts ob-
tained by the company. It was Paddock. 4
When bidding on work, Paddock and James disguised
their true relationship, securing repeated multi-million
dollar projects throughout the Southwest, all based on
the assumption that Don James was in control of
Native American. Although Paddock carefully con-
cealed the details of his relationship with James from
the contracting agencies, he boldly described the true
concept behind Native American to those who provided
its financing and bonding. Indeed, only by persuading
his financiers that John Paddock Construction Compa-
ny was holding the reins of Native American could Pad-
dock obtain the millions of dollars of bonding necessary
to bid on numerous Indian preference projects in the
Southwest. In a 1987 letter from Paddock to his bonding
company, Paddock explained that Native American was
merely a "tool" to allow him to bid on Indian prefer-
ence work. Paddock further revealed:
Don James has been an employee for the past
10 years . . . When we use [Native American]
71
to bid a job, Don ends up with a subcontract to
do his carpentry work.
As you can see from the information provided,
Don's personal statement does not really mean
much. His statement would be, I am sure, not
very strong. But since we have full control of
the financial management of [Native Ameri-
can], I don't feel concerned with this. 5
Indian preference was responsible for making Native
American a highly successful business, performing tens
of millions of dollars worth of government contracts.
Yet Native American had no assets or office, and all
bookkeeping and accounting functions were controlled
by Paddock. James was simply a de facto employee of
Paddock. Aside from a few carpentry subcontracts,
James had no financial stake in the relationship what-
soever. Paddock's company did the work, and its owner
took the profits. 6
Today, at the option of Paddock, Native American has
ceased doing business. Paddock has retired from the
construction business, and James must now make it on
his own. The Indian preference program simply lined
the pocket of a non-Indian, leaving an Indian contractor
without the income or guidance he has blindly depend-
ed upon for the past nine years. 7
SAVALA ASPHALT AND CONSTRUCTION
At the same time that Paddock created Native Ameri-
can, Indian preference enticed James Bagley, a non-
Indian officer of Arizona Refining Company, to Indian
country. Bagley' s company was involved in the sale and
application of petroleum-based road products in Arizo-
na. In the late 1970's Bagley, not unlike Paddock, real-
ized that BIA road construction contracts under Indian
preference would increase dramatically, thereby creat-
ing new and largely uncompetitive markets for his pe-
troleum road-paving products. All he needed to profit
from this specialized market was an Indian shell compa-
ny. 8
David Savala, a truckdriver for Bagley's company,
was Mexican- American; but his wife, Gevene, was a
member of the Kaibab Paiute Indian tribe. In 1980 he
was driving a truck for Arizona Refining, and she was
working as a health supervisor on her reservation. They
72
had no intention of starting their own company, nor did
they have the means to do so. 9
Bagley approached David Savala with an offer to
start a Savala family business. Bagley's plan called for
Mrs. Savala to be its 100 percent owner, despite her
complete lack of experience in construction and busi-
ness. He promised Savala's income as a truckdriver
would at least double, and that Savala would not have
to worry about incurring losses. With these promises,
Savala Asphalt and Construction of Glendale, Arizona,
was created. 10
As with Native American, the true relationship be-
tween Arizona Refining and Savala Asphalt was con-
cealed. Bagley and Arizona Refining controlled the se-
lection of projects and prepared bids using Savala As-
phalt stationery. Once work was obtained, Arizona Re-
fining officers would phone the Savalas and tell them
where they needed to appear to perform their duties.
They followed their instructions carefully, and David
Savala continued doing what he was trained to do —
drive a truck and lay petroleum products provided by
Arizona Refining. x *
Arizona Refining guaranteed the bonds obtained by
Savala Asphalt, but, in return, required that Savala
purchase its petroleum products from Arizona Refining
at an exorbitant markup. Not long after receiving its
first Indian preference contract, Savala Asphalt's gross
income shot up from less than $1 million per year to
more than $10 million annually. And the more road
contracts obtained by Savala Asphalt, the more prod-
ucts that Arizona Refining could sell them. 1 2
In 1986 Arizona Refining was sold, Bagley left the
company, and its new owners discontinued Savala As-
phalt's bonding. The front company was now aban-
doned, with devastating results for the Savala family.
David Savala was forced, for the first time, to take inde-
pendent control of the company bearing his name. He
made numerous attempts to obtain bonding on his own
but was repeatedly rebuffed. The annual volume of con-
tracts performed by Savala Asphalt dropped precipi-
tously and Savala was forced to pay unusually high pre-
miums for what little bonding he could obtain. Today,
the Savalas are barely struggling to survive. * 3
Sadly, the case of Gevene and David Savala is far
from unique. The Indian wife of one of the three largest
73
contractors in Oklahoma, like Gevene, was used by her
husband's business partners to obtain Indian preference
work. She was given 100 percent ownership of a sham
company and, as a formality, told to present all bids to
federal agencies and attend Board of Directors meetings
where she had no input. Like Gevene Savala, she had
no experience in contracting or even in any business;
her non-Indian backers simply exploited the market to
the greatest possible extent, and then left her front
company bankrupt. 1 4
EARLY AMERICAN CONTRACTING
Even Indians with contracting experience, such as
Albert Long, the Rosebud Sioux owner of Early Ameri-
can Contracting, Inc., in Rapid City, South Dakota, have
been victims of Indian preference abuse. Early Ameri-
can Contracting is currently inactive, and Long is
searching for work. Yet at one time, Early American
was the envy of South Dakota contractors, building mil-
lions of dollars worth of reservation housing under the
Indian preference program. 15
One primary reason for Early American's success in
obtaining Indian preference contracts was not apparent
on its financial statements. However, if one were to
visit Long at the height of Early American's business,
he could be found at the offices of R&S Construction, a
non-Indian firm in South Dakota. And if the initial cor-
porate documents of Early American were carefully in-
spected, they would reveal that a majority of Early
American's Board of Directors were R&S employees. 16
In 1981, by agreement, R&S Construction became a
"job proctor" to Early American. For the next five
years, R&S provided bonding and other support to Long,
enabling him to bid for numerous Indian preference
projects. But that support was not without its price, For
its assistance in bonding, accounting and field consulta-
tion services, R&S received 5.1 percent of the gross pro-
ceeds plus 49 percent of the net profits for each contract
awarded to Early American. According to surety
records, Early American lost $115,000 on one project at
the Fort Peck Reservation in Montana, while R&S prof-
ited $255,000 from the same project. In the long run,
Long's relationship with R&S did nothing to further his
business. "[A]ll that money, that eight, nine million dol-
74
lars worth of work — what have I got?" Long told Com-
mittee investigators, "Nothing." 17
BLAZE CONSTRUCTION
Even the largest and most experienced Indian con-
tractor, Blaze Construction, Inc., of Yakima, Washing-
ton, received bonding from a non-Indian, while deliber-
ately concealing this relationship from contracting
agencies. Blaze was formed by William Aubrey in 1983
and currently performs over $30 million worth of Indian
preference contracts per year, making it the largest
Indian contractor in the country. 18
Halverson Construction, a non-Indian firm, originally
provided bonding to Blaze and, in return, collected a
$200,000 "management" fee plus 49 percent of the net
profits for each job, as well as an option to take total
control of any job obtained by Blaze. However, Blaze
more recently has depended on bonding facilitated by
Albert DeAtley, a wealthy, non-Indian contractor who
owns several construction firms in Washington State. 19
In exchange for indemnification services, Aubrey, a
one-eighth Blackfeet Indian and the sole shareholder of
Blaze, secretly agreed to pay DeAtley 50 percent of
Blaze's net profits. Aubrey currently owes DeAtley over
a million dollars for bonding fees, and additional mil-
lions for loans made by DeAtley to finance Blaze's tre-
mendous growth. DeAtley also holds a hidden security
interest in all of Blaze's assets. For years Aubrey and
DeAtley successfully concealed their relationship from
the contracting agencies, both federal and tribal. 20
In 1987 the BIA discovered that DeAtley might be as-
sisting Blaze in obtaining bonding. On August 19 of that
year, the BIA sent a letter to their bonding company,
Seaboard Surety Company, requesting that Seaboard
clarify the relationship between DeAtley and Blaze.
Seaboard responded cleverly, specifically answering the
BIA's clumsily worded questions, but never revealing
the true nature of the relationship. BIA never pursued
the matter further. 21
PC&M CONSTRUCTION
Pat Chee Miller was one of the leading construction
contractors on the Navajo Reservation. The sole Navajo-
owned general contracting business licensed to do resi-
dential and commercial work in Arizona and New
75
Mexico, his company, PC&M Construction of Gallup,
New Mexico, was among the only Navajo businesses
able to bid and obtain million-dollar contracts. But the
price of Miller's success has been deception. 22
In 1986 Miller and Franz Springer of Springer Con-
struction formed a joint venture to take advantage of
Indian preference. 23 They told contracting agencies of
their joint venture, but intentionally misrepresented
the true details of their relationship. According to docu-
ments filed with federal and tribal authorities, Miller
was the managing party of the venture, controlled on-
site construction, and could ultimately determine how
profits and losses would be split between the parties. In
reality, Miller and Springer concealed a side-agreement
that delegated to Springer all the management duties,
powers and obligations of the venture. Their hidden
agreement also denied Miller the majority of the joint
venture's profits, assigning him instead a fixed salary. 24
CHUSKA DEVELOPMENT COMPANY
Larry Manuelito, a Navajo schoolteacher without any
construction experience, may have inspired Miller and
Springer. Twelve years ago Manuelito established what
he claims was the first joint venture created to take ad-
vantage of Indian preference. 26
In 1977 Manuelito, through the use of a shell corpora-
tion named Chuska Development Company, located in
Tahatchi, New Mexico, entered into a joint venture
with Morrison-Knudsen, Inc., one of the largest con-
struction firms in the United States. As with Miller's
venture, contracting agencies were told that the Indian
partner would receive most of the profits of any
projects. However, the true financial split was much dif-
ferent. Morrison-Knudsen received, off the top, five per-
cent of total contract revenues for management and
bonding, plus an additional four percent if it provided
design and architectural services. 26
Chuska Development had only one employee — Larry
Manuelito — and no equipment. Manuelito and Chuska
Development were simply a means by which Morrison-
Knudsen could qualify for Indian preference con-
tracts. 27
Manuelito's venture with Morrison-Knudsen ended in
1986 after performing tens of millions of dollars of
Indian preference contracts. Manuelito recently entered
76
into another joint venture agreement with Jaynes Cor-
poration, a non-Indian company. Pursuant to an early
1988 agreement between Jaynes and Chuska, Jaynes is
to receive, similar to the Morrison-Knudsen deal, a 49
percent net profit share and two percent of gross con-
tract revenues for management services. 28
M. GREENBERG CONSTRUCTION
Jeff Begay has been the Indian owner of a legitimate
Indian firm in Tempe, Arizona. As a true Indian con-
tractor, Begay has struggled to survive. He repeatedly
has been sought out by non-Indian contractors intent on
profiting from Indian preference work. 29
In 1985 M. Greenberg Construction, a non-Indian con-
tractor from Phoenix, Arizona, approached Begay with
the idea of forming a joint venture to take advantage of
Indian preference work. Greenberg proposed that, when
a project was obtained by the joint venture, Greenberg
would deduct fees for services such as payroll, bonding,
financing, and supervision. Begay was to get a mere one
percent of the remaining net profits. Begay was offered
a loan of $24,000 to invest in the joint venture, with the
understanding that he repay this loan from his measly
share of the profits. 30
After being rejected by Begay, Greenberg ^eventually
found an Indian interested in forming a "joint ven-
ture"— Guy Gorman of Arizona. Following a scheme
similar to the one rejected by Begay, Greenberg re-
ceived from the gross proceeds of every contract a seven
percent "overhead reimbursement fee ' as well as a two
percent net management fee. When all expenses were
paid, Greenberg still received an additional sixty per-
cent of the net profits. It is no surprise that Gorman
eventually ended his relationship with Greenberg. Like
so many other non-Indian contractors entering into
these relationships, self-interest— not fairness— was the
prime focus. 31
K INDUSTRIES, LIVINGSTON, AND DJB ENTERPRISES
Within a four-year period Hunt Building Corporation
of El Paso, Texas, a major non-Indian contractor, en-
tered into three separate relationships with different In-
dians to gain access to the Indian preference markets.
As early as 1981, Hunt was involved in a joint venture
with K Industries, an Indian concern. An accounting
77
firm reviewed Hunt's accounting procedures and ques-
tioned the absence of separate books for K Industries.
Apparently, Hunt conducted all the accounting and
bookkeeping for K Industries. 32
In 1985 Hunt created another joint venture, this time
with Vemold Livingston, an Indian individual. When
obtaining bonding for the venture, Hunt assured repre-
sentatives from a surety company providing bonding
that Livingston had "no control over the work or
funds." 33
On April 8, 1985, Hunt entered into yet another joint
venture with DJB Enterprises of Albuquerque, New
Mexico. An agreement between the parties called for
Hunt to receive seven percent of the contract price as a
management fee, in addition to its 51 percent of the
joint venture's net profits. 34
An internal surety company memorandum dated De-
cember 5, 1985, provided insight into the reasons for
this arrangement:
Basically, these joint ventures come about to
provide the required Indian preference for
Indian housing projects. You will note that the
joint venture agreement for the bond indicates
that Hunt will handle all the joint venture fi-
nancial resources in management and sets up a
mutually agreeable fee for the use of its work-
ing capital, bonding capacity, etc. In this way,
they have a 51% minority owned joint venture,
but all of the control of the job, subcontractors,
and financial resources are remaining with the
Hunt organization. This particular joint ven-
ture is involved with another party 51% Indian
who has minimal contracting skills. However,
he does have adequate background and experi-
ence to pass the scrutiny of the Zuni [tribal]
housing authority. 35
SOUTHWEST INDIAN CONSTRUCTION
Hidden agreements and siphoning profits from Indian
fronts have become commonplace in the construction in-
dustry. For example, Greg and Peter Mizioch, two non-
Indians from Arizona, devised a novel way of opening
up Indian preference markets to non-Indian businesses.
78
In 1988 Southwest Indian Construction, 51 percent
Indian-owned and 49 percent held by the Miziochs, was
created with the intention that it would obtain Indian
preference contracts and be backed by one of three non-
Indian companies, depending upon the type of project.
For contracts involving specialty items such as fence
lines and cattle guards, Southwest Indian Construction
would be indemnified by the Miziochs. In return, the
Miziochs would receive a subcontract for a majority of
the work. Similar arrangements have been made be-
tween Southwest Indian Construction and Wheeler Con-
struction for road construction, and between Southwest
Indian and C.S. Construction, Inc., for the building of
structures. 36
The Miziochs provided the Indian who "owned" 51
percent of Southwest Indian Construction with a room
in their office and gave him "gas money" to travel in
search of Indian preference contracts — all for the profit
of non-Indians. 37
Indian Preference Abuse: A Multi-Agency Problem
By devoting more than two hundred million dollars
annually to Indian preference and giving the program
little oversight, the federal government has created a
market permeated by fraud and abuse. Indian prefer-
ence markets are dominated by non-Indian backers
who, with their wealth and bonding capacity, reap most
of the profits and experience. Given such competition,
legitimate independent Indian businesses simply cannot
survive. 38
The current abuse of Indian preference pervades all
the principal federal government agencies and various
tribal agencies, including the BIA, the Indian Health
Service (IHS), HUD and the Small Business Administra-
tion (SBA).
The Bureau of Indian Affairs distributes over $54 mil-
lion annually in government contracts subject to Indian
preference. Non-Indian contractors such as Arizona Re-
fining and Albert DeAtley have reaped the rewards of
BIA road construction projects let under Indian prefer-
ence. William Aubrey of Blaze, himself quite experi-
enced with non-Indian backing, believes fronting is a
substantial problem in BIA projects. Commenting on his
experience bidding for millions of dollars of BIA road
79
contracts, Aubrey noted that "most of the [bidders] were
not what I term 'real Indian contractors.' " As BIA
Indian preference contracts became more common in
the early 1980's, the National Association of Indian
Contractors' membership grew tremendously. But, in
the opinion of the association's president, Edward
Danks, at least half of the organization's 200 to 300
members were fronts, not legitimate Indian firms. 39
In 1988 the Indian Health Service of the Department
of Health and Human Services made about $39 million
in Indian preference contracts available for bid. John
Paddock and Springer are two of the many non-Indian
contractors benefiting from those IHS contracts. John
Paddock notes that during his experience with Indian
preference work, including IHS contracts, he observed
at least eight or ten "fronts," such as his own, operating
on various reservations. 40
The Department of Housing and Urban Development
let approximately $125 million in Indian preference con-
tracts available for bid in 1988. R & S Construction and
Morrison-Knudsen are just two examples of non-Indian
contractors that have profited from HUD's program.
Jeff Begay, experienced in HUD housing contracts, tes-
tified that "a good percentage of my competitors are
front companies" and that only "two [Indian-owned con-
struction companies] in Arizona are legitimate Indian
companies, out of the five to seven that are presently
there." 41
The SBA's Section 8(a) minority set-aside program,
like those of other federal agencies, has been the subject
of abuse by contractors involved with Indian preference.
"Indian" companies such as Kinross Manufacturing
Company in Michigan have fronted for non-Indian in-
terests and have benefited from contracts, including de-
fense work, set aside for firms qualified by SBA as dis-
advantaged. 42
Kinross Manufacturing Company has been certified
as a disadvantaged Indian business eligible to receive
contracting preference pursuant to SBA s 8(a) program.
With this status, Kinross has received millions of dol-
lars in minority set-aside Department of Defense con-
tracts to manufacture munitions. 48
In reality, Kinross is a company controlled by
wealthy and influential non-Indians. The main architect
of Kinross was Roy Jacobsen, a partner in the Washing-
80
ton, D.C. consulting firm of Gnau, Carter & Jacobsen.
Jacobsen's plan used Gerry Blanchard, an individual
claiming a tenuous affiliation with the Sault Ste. Marie
Band of Chippewa Indians, as the disadvantaged minori-
ty applicant in the Kinross organization. At the time
Kinross was being formed, Blanchard was a chauffeur
for Jacobsen's firm. Blanchard had never been an en-
rolled member of any Indian tribe until 1983, when he
joined the Chippewa tribe for the sole purpose of quali-
fying Kinross as a disadvantaged firm. Blanchard was
later described as "embarrassed" about claiming Indian
heritage. He even laughed and joked about it to his as-
sociates. 44
The initial financing of Kinross was a sham. Jacobsen
and his firm devised a scheme where the capital for
Kinross would be totally leveraged. Initial capital for
Kinross was financed by a $2.9 million loan obtained
from the Farmer's Home Administration and under-
written by John McGoff, a wealthy non-Indian Michi-
gan businessman. Through two holding companies,
McGoff was given, in return, a 39 percent interest in
Kinross. 45
Kinross' 8(a) certification was granted by the SBA
over the strong objections of the local office and several
staff members in the Chicago regional office. But Kin-
ross had an ally in Richard Durkin, the SBA Regional
Administrator and a close friend of Jacobsen. It was
Durkin who recommended waiving several SBA rules
on behalf of Kinross. In fact, Durkin went to some
lengths to orchestrate a conference call enabling Jacob-
sen to take Kinross' case directly to Dur kin's staff. 46
Durkin's staff, in turn, referred the Kinross applica-
tion to the SBA national office for a waiver of rules and
final acceptance. Robert Saldivar, the Deputy Associate
Administrator for SBA, explained to one of Jacobsen's
former employees that he was very surprised that an
application requesting such significant waivers even
made it to the national level, but that there was "a lot
of pressure to approve it." The Kinross application and
its attendant waivers were subsequently approved by
SBA, and Saldivar personally delivered the good news
to Jacobsen. 47
81
The Agencies' Responses
The BIA, IHS, HUD and SBA have all been negligent
in ensuring that firms qualifying for Indian preference
contracts are, in fact, legitimate Indian firms. In the
past 31 years, only two companies have been disquali-
fied from Indian preference eligibility by the BIA. More-
over, only one of the 19 companies investigated by the
Committee was ever questioned by BIA officials. In ad-
dition, HUD has never disqualified a single company for
being a front firm. By contrast, in just eight months,
the Special Committee identified 19 instances of front-
ing involving high-volume Indian contractors. 48
In fact, BIA was warned earlier about the potential
for massive fraud in its Indian preference road con-
struction program. In a 1987 internal memorandum to
the Deputy to the Assistant Secretary for Indian Affairs
(Office of Trust and Economic Development), the Chief
of BIA's Division of Transportation criticized the BIA
for its unwillingness to decertify rampant illegitimate
Indian preference contractors. The memo provided nu-
merous examples of abuse by Indian preference contrac-
tors and warned that the BIA's "road construction pro-
gram nationwide is open to the possibility of massive
fraud in [Indian preference] contracting.' The memo
went on to warn that the consequence of "no action" by
BIA officials "will almost certainly result in a financial
scandal which will call into question the ability of BIA
to manage this program." 49 Acting Assistant Secretary
for Indian Affairs Pat Ragsdale admitted in his testimo-
ny that the BIA Division Chiefs memo warning of mas-
sive fraud and financial scandal presaged in broad con-
tours what the Committee found. 50
Yet these warnings went unheeded, and today any
construction firm can qualify for Indian preference in
BIA contracts by simply completing a self-certification
form and sending it to the BIA. The environment is ripe
for illicit relationships because no mechanism exists to
determine whether front organizations exist. Conse-
quently, BIA lacks data as to whether or not fronting is
pervasive. The agency has relied exclusively on the con-
tracting community to police itself, but very few com-
plaints against companies ever reach the BIA Washing-
ton office. As Secretary Ragsdale acknowledged, "There
is a problem and ... a breakdown in processes. . . .
82
[T]he Bureau of Indian Affairs . . . lacks some systems
to do adequate follow-up." 51
Moreover, contracting agencies have either failed to
issue guidelines, or if issued, they have proved to be in-
effective, confusing and contradictory. In fact, on many
occasions, attorneys have opined to their contractor cli-
ents that their actions do not necessarily violate Indian
preference guidelines, despite the fact that these actions
clearly violate the spirit and impede the goals of Indian
Drfifsrcnce
In 1986 Chris Evans' attorneys, for example, advised
him that he need not worry about entering into an ad-
dendum agreement with Jeremiah LeMesa, an Indian
contractor and owner of Indian Construction Services,
located in Scottsdale, Arizona. Evans, the non-Indian
owner of Evcor Construction, had previously entered
into a joint venture agreement with LeMesa and, for
some time, profited from the venture's numerous Indian
preference projects. The new addendum denied LaMesa
a majority of the profits by giving him only a set fee per
project. Evans' attorneys recommended that he sign the
addendum and then withhold it from the contracting
agencies. Evans followed his attorneys' advice. 53
The inconsistent implementation of Indian preference
among the different agencies is partially the result of
Congress passing two duplicative, yet somewhat contra-
dictory, statutes. Each statute conveys different degrees
of authority for implementing Indian preference, and
each has been interpreted to require different qualifica-
tion standards.
The first Indian preference law, the vaguely-written
Buy Indian Act of 1910, applies to the BIA and IHS. Al-
though Congress passed the law almost eighty years
ago, BIA has never issued final regulations under the
Act. The other statute authorizing Indian preference,
Section 7(b) of the Indian Self-Determination and Edu-
cation Assistance Act of 1975, has extended Indian pref-
erence to the Department of Housing and Urban Devel-
opment and tribal governments. 54
The Buy Indian Act has been interpreted as imposing
a duty on the BIA and IHS to enter into prime con-
tracts with Indian-owned companies, while Section 7(b),
for other agencies, confers broad discretionary authority
in determining if and how Indian preference will be ap-
plied. Moreover, the Buy Indian Act does not provide
83
guidance as to what standards must be met by a compa-
ny qualifying for preference. In contrast, Section 7(b) re-
quires that a firm be at least 51 percent Indian-
owned. 55
Conclusion
Almost two decades ago, Pat Chee Miller, a young
Navajo, had visions of becoming a successful contractor.
Miller hoped that Indian preference would allow him to
turn those dreams into reality. But given the sad state
of the Indian preference program, Miller learned that
his goals were unattainable without deceiving the con-
tracting agencies and becoming dependent on a large,
non-Indian contractor.
The stories now circulating in Indian country are of
deceptive contractors who have become successful, or of
honest contractors whose businesses have failed. Indian
preference as currently implemented has provided
American Indians little or no real economic opportuni-
ty, while encouraging dishonesty and deceit. Only when
the integrity of the Indian preference contracting pro-
gram is restored, will new stories begin to be heard on
the reservations— the stories of honest, hardworking
Indian contractors who have developed successful and
respected businesses that make a real contribution to
their tribal communities.
ENDNOTES
ECONOMIC DEVELOPMENT AND INDIAN PREFERENCE
CONTRACTING
1 25 U.S.C. § 47; Senator John McCain, Co-Chairman, Special
Committee on Investigations, Hearings, Part 1, Jan. 31, 1989 at pp.
98-99
2 See Hearings, Part 1 at pp. 87-214, 481-89 (Jan. 31 and Feb. 1,
1989), and Part 2 at pp. 1-75, 297-320 (Feb. 2, 1989); Kenneth
Ballen, Chief Counsel, Special Committee on Investigations, Hear-
ings, Part 3, Feb. 27, 1989 at pp. 250-52.
3 John Paddock Testimony, Hearings, Part 2, Feb. 2, 1989 at p. 3.
4 Id. at pp. 3-5; Letter, John Paddock, FAITHCO, to Coroon &
Black of Arizona (Debbie), Apr. 27, 1987 (Hearings, Part 2, Feb. 2,
1989 at p. 299).
5 Id.; Paddock at pp. 5-6; See List, "Faithco Ltd; John Paddock
Construction, Inc.: List of Construction Projects — Indian Projects
Only."
6 Paddock at pp. 4-5.
7 Donald James Testimony, Hearings, Part 2, Feb. 2, 1989 at pp.
11, 20.
8 David Savala Affidavit, Hearings, Part 1, Jan. 31, 1989 at p.
131; James R. Bagley Testimony, Deposition, Jan. 10, 1989 at pp. 6-
7, 13-15.
9 David Savala at pp. 131-33; Gevene Savala Testimony, Hear-
ings, Part 1, Jan. 31, 1989 at p. 136.
10 David Savala at pp. 131-33; Bagley Deposition at p. 17.
11 David Savala at pp. 131-34.
12 Id. at pp. 131-32, 134, 139-40; Louis Day Testimony, Hearings,
Part 1, Jan. 31, 1989 at p. 141.
13 Id.; David Savala at pp. 132, 134.
14 William Kraig Kendall Testimony, Hearings, Part 1, Feb. 1,
1989 at pp. 178-79.
15 Richard James Elroy, Special Agent (FBI), Special Committee
on Investigations, Testimony, Hearings, Part 1, Jan. 31, 1989 at p.
120; Albert Long Testimony, Deposition, Dec. 21, 1988 at p. 40.
16 Elroy at p. 120.
17 Id. at pp. 120-21; Memorandum, Gordon E. Wibbens, Bond
Manager, to Home Office Contract Bond Department of the St.
Paul, July 20, 1984; Long Deposition at p. 37.
18 William H. Aubrey Testimony, Hearings, Part 1, Jan. 31, 1989
at pp. 151-56.
19 Id. at p. 151.
20 Id. at pp. 151-57.
21 Id. at pp. 156-57; Letter, Carl Hotubbee, Contracting Officer,
BIA, to Terry Dolar, Seaboard Surety, Aug. 19, 1987; Letter, Terry
(84)
85
Dolar, Seaboard Surety, to Carl Hotubbee, Contracting Officer,
BIA, Sept. 4, 1987.
22 Pat Chee Miller Testimony, Hearings, Part 2, Feb. 2, 1989 at
pp. 35, 60.
28 Miller and Springer had entered into a previous joint venture
in the early 1980's, but that venture was terminated after perform-
ing two contracts. Id. at pp. 26-27.
24 Id. at pp. 26-28; Franz Springer Testimony, Hearings, Part 2,
Feb. 2, 1989 at pp. 36-38; Agreement, Springer Construction Com-
pany and P C & M Construction Company, Apr. 10, 1986; Letter,
Pat Chee Miller, P C & M Construction Company, to Franz Spring-
er, Springer Construction Company, undated (Hearings, Part 2,
Feb. 2, 1989 at pp. 310-11).
26 Larry Manuelito Interview, Jan. 4, 1989.
26 Elroy at pp. 123-24; Joint Venture Agreement, Morrison-
Knudsen Company, Inc. and Chuska Development Corporation,
July 22, 1977, as amended.
27 Elroy at pp. 123-24; Manuelito Interview.
28 Id.; Joint Venture Agreement, Jaynes Corporation and Chuska
Development Corporation, Jan. 25, 1988.
29 Over the past four years, Begay has worked hard to see his
company, Amerind, grow. But years and many contracts later,
Begay has approached a number of Department of Treasury-ap-
proved sureties and can obtain bonding only for projects worth less
than $500,000. Jefferson Begay Interview, Sept. 15, 1989; Begay
Testimony, Hearings, Part 1, Jan. 31, 1989 at pp. 87-100.
80 Id. at pp. 90, 92, 97-98.
81 Elroy at pp. 122, 125; Consulting and Services Agreement,
Gorman-Greenberg, Inc. and M. Greenberg Construction, June 3,
1983, as amended.
82 Elroy at p. 125; Letter, Peat, Marwick, Mitchell & Co. to Hunt
Building Corporation, Oct. 26, 1981.
88 United Pacific Insurance Company, Execution Report No. U
38 14 20.
84 Elroy at p. 125; Joint Venture Agreement, DJB Enterprises
and Hunt Building Corporation, Apr. 8, 1985; Memorandum of
Agreement, DJB Enterprises and Hunt Building Corporation,
Aug. 22, 1986.
85 Internal Memorandum, Neal Clark, Dallas Bond Department,
United Pacific Surety, to Phil Crosetta, Contract Bond Department,
Sept. 5, 1985.
86 Letter, Larry Olsen, K L & K Associates, Inc., to Louis Cassise,
Surety Bond Services, July 6, 1988.
87 Grey Mizioch Interview, Dec. 12, 1988.
88 Begay at pp. 89-100; Edward Danks, President, National
Indian Contractor's Association, Testimony, Hearings, Part 1, Jan.
31, 1989 at pp. 100-13.
89 Aubrey at p. 153; Danks at pp. 103, 110-11; Kim Armstrong,
Procurement Analyst, Division of Contracting and Grants, Bureau
of Indian Affairs, Interview, Oct. 17, 1989.
40 Paddock at pp. 6-7; "Public Health Service: Extramural
Awards," Office of the Assistant Secretary for Health, Department
of Health and Human Services, FY 1988 at p. 32.
86
4 * Begay at p. 89; Dominic Nessi, Director, Office of Indian Hous-
ing, Department of Housing and Urban Development, Interview,
Oct. 17, 1989.
42 Steven Marica, Assistant Inspector General for Investigations,
Small Business Administration, Testimony, Hearings, Part 1, Feb.
1, 1989 at pp. 206, 211-12; Begay at pp. 92-93; Danks at p. 101.
43 Richard Ramirez Testimony, Hearings, Executive Session, Feb.
1, 1989 at pp. 9-13, 25-29.
44 Id. at pp. 8-11, 15, 25, 32.
45 Id. at pp. 10, 22-23.
46 The Kinross business plan contained elements that required
high-level waivers of SBA rules. First, Jacobsen was a former em-
ployee of SBA, and the SBA had stringent rules as to the role
former employees could play in the plans for a new applicant.
Second, Blanchard had a significant lack of business experience.
Third, a question existed whether Blanchard would be participat-
ing actively in the Kinross business since Blanchard lived in the
Washington area and Kinross was to be located in Michigan. Final-
ly, the business plan contained a strong contingency for almost $3
million in financing. Id. at pp. 15-17.
47 Id. at pp. 17-20.
48 Donald Asbra, Chief, Division of Contracting and Grants,
Bureau of Indian Affairs, Testimony, Hearings, Part 1, Feb. 1, 1989
at p. 197; William "Pat" Ragsdale, Acting Assistant Secretary for
Indian Affairs, Department of the Interior, Testimony, Hearings,
Part 3, Feb. 27, 1989 at p. 252; Nessi Testimony, Hearings, Part 3,
Feb. 27, 1989 at p. 278.
49 Ragsdale at pp. 253-58; Memorandum, Chief, Division of
Transportation, Bureau of Indian Affairs, to the Assistant Secre-
tary for Indian Affairs, Office of Trust and Economic Development,
Oct. 13, 1987 (Hearings, Part 3, Feb. 27, 1989 at pp. 254-55). The
Committee obtained this document, whose legitimacy was con-
firmed by top BIA officials, from a confidential source at BIA. The
BIA itself never provided the document, despite repeated requests
by the Committee.
50 Secretary Ragsdale testified that "any person with reasonable
intelligence reading [the Committee's] transcripts would probably
come to that conclusion." Ragsdale at p. 257.
5 1 The BIA relies currently upon contracting officers in the field
to detect any abuses by companies obtaining Indian preference con-
tracts. However, relying on contracting officers for enforcement
has not been effective because they "are basically program people,"
not investigators. Asbra at p. 201. Determining whether companies
violate Indian preference guidelines can require a very complex
and detailed investigative analysis of the day-to-day operations and
finances of numerous companies. Begay at p. 95; Danks at p. 105;
Asbra at p. 201; Ragsdale at p. 257.
52 The Bureau of Indian Affairs, for example, has never issued
final regulations regarding the implementation of Indian prefer-
ence. The BIA has proposed three different sets of final regulations
on Indian preference on three separate occasions, but none have
been accepted as final regulations. The BIA published proposed
regulations in the Federal Register in 1982 (47 Fed. Reg. 44678,
87
Oct. 8, 1982), in 1984 (49 Fed. Reg. 45187, Nov. 15, 1984), and in
1988 (53 Fed. Reg. 24738, June 30, 1988); Danks at p. 102.
53 Chris Evans Interview, Dec. 16, 1988; Addendum To Joint Ven-
ture Agreement of Indian Construction Services, Apr. 9, 1986.
54 Section 7(b) further requires that all federal agencies encour-
age the hiring of Indian firms in subcontracts where the prime con-
tract is for the benefit of Indians. 25 U.S.C. § 450e(b); 25 U.S.C. § 47.
55 For example, the requirements of Section 7(b) are satisfied if
an agency simply includes a provision in the prime contract which
states that the prime contractor will make an effort to subcontract,
if necessary, with Indian-owned firms. See In re J&A, Inc., 59
Comp. Gen. 739 (Sept. 22, 1980), In re Department of Interior, 58
Comp. Gen. 160 (Dec. 22, 1978); 25 U.S.C. § 1452(e). For many years,
agencies have been applying different qualification standards for
their respective Indian preference programs. Before 1988 the BIA
interpreted the Buy Indian Act as requiring 100 percent Indian
ownership, whereas 7(b) allowed preference to firms at least 51 per-
cent Indian-owned. Today, IHS requires no less than 100 percent
Indian ownership, whereas BIA and HUD now require at least 51
percent.
CHAPTER 2
CHILD SEXUAL ABUSE IN FEDERAL INDIAN
SCHOOLS
While child sexual abuse is a growing menace
throughout Indian country and indeed across the
nation, the Bureau of Indian Affairs (BIA) has ignored
the problem in its own schools. 1 There has been a com-
plete administrative breakdown in detecting and report-
ing pedophile teachers and other employees at BIA
schools. BIA has allowed pedophiles to continue teach-
ing even after they were reported to BIA school offi-
cials. In fact, BIA administrators repeatedly failed to
report child sexual abuse allegations to law enforce-
ment authorities and even threatened persons making
allegations with slander suits. BIA T s negligence led to
needless cases of child molestation, yet many of the neg-
ligent officials were actually promoted to higher posi-
tions. 2
Indian children across the country must now bear the
burden of BIA's mistakes and suffer the trauma of
sexual abuse on reservations where mental health treat-
ment is often unavailable. Lacking access to quality
therapy, some former victims of BIA employees have
grown up to become child molesters themselves, perpet-
uating a tragic cycle of abuse. 3 The cases of Paul Price,
John Boone, Terry Hester and others illustrate the fail-
ure of BIA to fulfill one of its most important responsi-
bilities, namely to Indian children.
The Paul Price Case
price at the camp lab school
Paul Price obtained a teaching certificate in North
Carolina and taught at a number of public schools, in-
cluding the Campus Laboratory School ("Camp Lab") in
western North Carolina. In the spring of 1971, unaccom-
panied by other adults, Price took six of his Camp Lab
(89)
24-087 0-89-4
90
seventh grade students, all boys, on a weekend camping
trip in the Smoky Mountains. 4
Late Saturday night Price snuck into the tents of sev-
eral of the boys and sexually abused them. Price even
forced one boy to have oral sex with him. When one of
the boys who had not been molested that night learned
that something strange had happened to his fellow
campers, he told his father, Dr. Arthur Justice, the
principal of the Camp Lab school. 5
Shocked by his son's story, Justice confronted Price.
At first, Price denied the charges. When Justice, howev-
er, threatened to line up the boys who were on the trip
and have them tell their stories to his face, Price con-
fessed. Price was fired from Camp Lab and never re-
turned. 6
PRICE IS HIRED AT CHEROKEE
To his chagrin, Justice discovered in August of 1971
that Price had been hired to teach at the BIA elementa-
ry school on the Eastern Band of Cherokee Indian reser-
vation in Cherokee, North Carolina. Although Price
listed the Camp Lab school in his employment applica-
tion to BIA, Bureau officials never contacted Justice or
anyone else at the Camp Lab school, and were therefore
initially unaware that Price was an admitted child mo-
lester. 7
Justice, undaunted by BIA's apparent lack of concern,
was so disturbed that Price had been hired at Cherokee
that he sent a strongly worded letter to T.J. DuPree,
the BIA principal of the Cherokee Elementary School,
disclosing Price's penchant for young boys. Although
the BIA did not respond, Justice assumed the matter
had been properly dealt with. However, the letter was
ignored. 8
With no fear of his past catching up to him, Price
began teaching both third grade children and the chil-
dren most vulnerable to his unwanted advances — spe-
cial education students. And no sooner had Price ar-
rived in the classroom than he once again gave in to his
"urges" and began molesting young boys. 9
Price's technique for molesting children was simple,
but devious. Price would first target a needy boy who
craved attention. These were usually boys who, like
himself, had no father or came from a broken home.
Price showered these boys with attention, often buying
91
them Cokes, candy bars, and expensive gifts like base-
ball gloves, bicycles and teddy bears. Getting as close as
he could to them, Price coached boys' sports teams, su-
pervised camping trips, ate lunch with his students and
even swung with them on his lap in the playground
during recess. 10
Price was visibly affectionate and gave "his" boys
hugs, kisses and pats on the behind. Price's secret goal,
however, was to win the trust of the boys and then
seduce them. Once Price had won their trust, he would
strike by placing his hands on both the inside and out-
side of the boys' clothing and then begin fondling
them. 11
While on the Cherokee school grounds, Price tried to
restrict his sexual activities to fondling and to avoid de-
tection, he preferred to teach alone. Price instructed the
aides assigned to him to sit behind a screen in the
corner of his classroom. 12
Price was bolder outside school grounds. He mastur-
bated while fondling his child victims and frequently
engaged in oral sex with them. Price particularly de-
sired boys between the ages of eight and twelve because
older boys "talked too much." 13
Frightened and confused by Price's advances, the
young boys were kept silent by threats. Price told more
than one boy, "I'll cut off your penis and turn you into
a girl if you tell." 14
To intimidate young boys, Price sometimes met with
his victim's mother and cultivated her friendship. He
thought that no parent who perceived him as a "nice"
teacher would believe tales of his perversion. 16
Price began molesting children from the start of his
first school year at Cherokee in 1971. Even Price, how-
ever, sometimes felt spasms of guilt and stopped his mo-
lestation. During these times Price would fight to con-
trol his pedophilia, but invariably he would lose control
over his urges and once again resume molesting chil-
dren. 16
DR. JUSTICE AGAIN WARNS BIA OFFICIALS
In 1974 Justice taught a course for teachers at the
Camp Lab school that was attended by two teachers
from the Cherokee school. Shocked to learn from them
that Price was still teaching at Cherokee, Justice told
the teachers that Price "should never be around chil-
92
dren." As a result, Justice met with the Chief of the
Cherokee tribe, John Crowe, and a tribal councilman,
Glenn Bradley, to relay Price's prior history at Camp
Lab. 17
Deeply disturbed by Justice's story, Chief Crowe and
Bradley then met with Robert Evans, the highest BIA
official at Cherokee, and told him about the Camp Lab
incident. Evans promised Crowe and Bradley that he
would take action, and suggested Justice write a letter
to BIA setting out the facts. Justice wrote the letter, but
again received no response from BIA. Moreover, Price
himself was not questioned by BIA officials concerning
the allegations and freely continued teaching at the
Cherokee elementary school. 18
But Justice's letter led to bizarre consequences. Short-
ly after the meeting between Evans and the tribal lead-
ers, the teachers at the Cherokee school were called to a
meeting by the school principal, Ray Cleveland. He
stated that people were spreading rumors about a teach-
er, and if they did not stop, they would be sued for slan-
der. Reading from a BIA manual, the school's personnel
director then listed the penalties for slander, which in-
cluded dismissal from employment. Frightened by these
thinly veiled threats, the two teachers who had learned
about Price decided not to press Justice's account any
further. 19
THE ALLEGATIONS CONTINUE
Despite BIA's official myopia, allegations against
Price's blatant behavior continued. Throughout the
1970's and early 1980's there were repeated stories that
Price was sexually molesting young boys. 20
Yet whenever there was a complaint, Price was not
forcefully questioned by BIA school officials. Instead, he
was asked, "You didn't really do this, did you?" and
Price's denials were always accepted. The same princi
pal who refused to act on Justice's letter simply men
tioned to Price on one occasion that he should "refrain'
from touching children. Several BIA supervisors even
offered Price friendly advice like "Paul, why don't you
get married?" in the hopes that the scurrilous allega-
tions would then cease. But no one reported Price to
law enforcement authorities or to their BIA superiors in
Washington, D.C. 21
ff
93
In 1982 a series of anonymous letters alleging that
Price was molesting children circulated among the par-
ents of Price's students. Again, no one at BIA investi-
gated these allegations or reported them to federal law
enforcement authorities. By failing to consider allega-
tions, BIA permitted Price to escape detection and con-
tinue molesting children. 22
In November 1984, Price had become so blatant that
he began to massage the crotch of one of his third grade
students in the school hallway. When Ollie Locust, a
teacher's aide, caught him in the act of molesting the
child, Price pretended he was simply praising the boy.
Deeply shaken by the incident, Locust immediately told
her story to the principal of the school, Mary Widen-
house. Widenhouse told Locust that she had done the
right thing by reporting the incident, but that it was
now "out of your hands." Widenhouse stated that she
would have Price "watched" but also told Locust, "I
don't want you to say anything about this. You could be
hit with a slander suit if you do." 23
Widenhouse did not report the hallway incident to
law enforcement authorities and only indirectly ques-
tioned Price. She accepted Price's easy denial, as had all
of her predecessors. Price continued to teach the stu-
dent he molested in the hallway. Widenhouse's only
other response to Locust's eyewitness report was to
have Price "watched" by another teacher and by the as-
sistant principal, Roy Lambert. As could be expected,
BIA's half-hearted attempts to "watch" Price failed. 24
PRICE IS FINALLY CAUGHT
Keneitha Haigler's son always enjoyed school. From
the time he was three years old he wanted to join his
sister on the bus that went to the Cherokee school. Sud-
denly, in the fall of 1985, the eight-year-old boy who
loved school began to fear it. "How many days until
Saturday?" he asked his mother. On other days the boy
would say, "I'm sick and don't want to go." 25
Then the nightmares began. Awakened by her son's
cries in the night and his constant pounding on the
walls, Haigler felt an intense fear in her son that she
could not trace. The boy's violent drawings of fire, death
and destruction also were a troubling mystery. 26
Late one evening in October 1985, Haigler entered
her son's room. The boy was sitting in bed with a blan-
94
ket over his head. Clearly frightened, he said Price had
repeatedly molested him. Price had molested the boy in
the classroom, the lunchroom, and even the hallways. 27
Her worst fears raised, Haigler questioned the Super-
intendent of the Cherokee Elementary School, John
Wahnee. Haigler was dismayed that Wahnee was not
surprised by her allegations. In fact, Wahnee explained
that windows were being placed in Price's classroom to
"discourage" that type of activity. Wahnee instructed
Haigler to write a letter detailing her complaint, after
which Price was finally reported to law enforcement of-
ficials. 28
Price was suspended from teaching a week after the
Haigler allegations surfaced and the FBI began an in-
vestigation. Ironically, on his last day of school, Price
attended a school Halloween party and wore a prison
costume with stripes and a serial number. 29
While the school was in an uproar over Price's arrest,
other accounts of his sexual deviancy came to light.
Young boys who before were frightened into silence at
last began to tell their stories. The evidence mounted
and Price was indicted on 21 counts of taking "indecent
liberties" with four minors. 30
Publicly, Price continued to insist on his innocence,
and the case was scheduled for trial. On the day of trial,
Price went into the courthouse restroom and when he
came out, he faced a line of young boys who stood ready
to accuse him. Standing with the boys was a highway
patrolman, the same person who twenty years earlier
had been molested by Price. Scared by the prospect of
confronting those he had abused, Price pled guilty to
one count of molesting Haigler's son and was sentenced
to the maximum term of ten years in prison. 31
Price, however, insisted that he was innocent even
after his guilty plea, telling his friends that he only
pled guilty to save the boys from having to testify.
Many of the teachers at the school believed his story
and the Assistant Principal, Roy Lambert, flatly refused
to apologize to one of the victims' parents even after
Price was convicted. 32
price's confession
In April 1989, Price's steadfast protests of innocence
broke down. Price, incarcerated in a maximum security
prison, confessed, under oath, to Special Committee in-
95
vestigators that he had molested children all of his life,
including at least 25 young boys at the Cherokee Reser-
vation. Price admitted that his repeated pattern of mo-
lestation at Cherokee began in 1971 and ended in 1985
and that the BIA school officials knew of the allegations
for most of his fourteen-year tenure. The fact that they
did not pursue them was "a phenomenon that's hard to
understand," Price testified. Price candidly acknowl-
edged, "I was waiting for someone to stop me." 33
Inexplicably, no BIA official at the Cherokee school
was ever disciplined for failure to report the allegations
concerning Price. Dupree in 1971, Evans in 1974, Wi-
denhouse in 1984 and Wahnee in 1985 all had ample
notice of Price's acts. Instead, some of these supervisors
gained promotions. Widenhouse was promoted to the
BIA's Office of Education in Washington, D.C. Wahnee
was promoted to superintendent of schools on the Hopi
Reservation. Lambert remains the Assistant Principal
of the Cherokee school. Ultimately, supervising a pedo-
phile who molested children at will for 14 years did not
harm anyone's career at BIA. As Acting Assistant Sec-
retary for Indian Affairs William Ragsdale testified
before the Committee, it was "inexcusable" that the
BIA allowed a pedophile like Price to thrive in its
schools for 14 years. 34
The John Boone Case
John Boone was hired in 1979 as a remedial reading
teacher at the Polacca Day School, a BIA school on the
Hopi Reservation in Arizona. Boone gained the trust of
the Hopis during the early 1980's and impressed many
with his awards from the BIA for his innovative Eng-
lish-language teaching methods. 35
Boone was also a favorite of his Hopi students. They
liked going to his house to play games and watch
videos. Actively involved with the children, Boone
coached basketball, volleyball and softball, and fre-
quently took the children on overnight trips for sport-
ing events. Beneath his appearance of normalcy, howev-
er, Boone concealed a darker side. 36
In March 1981, then-Navajo County Deputy Sheriff
Larry K. Baldwin learned that Boone was taking Hopi
boys between 13 and 18 years old to motels and to his
own house. During these excursions, Boone provided al-
96
cohol to the boys in a ploy to get them drunk and
remove their clothes. On one trip, a boy awakened on a
couch in Boone's house to find himself without clothing.
Boone, also naked, was staring at him from underneath
a table next to the couch. In other cases, when the boys
asked why their clothes were removed, Boone told them
he had "washed" them because they were "dirty." 37
Although Baldwin could not get the boys to pursue
their allegations, he contacted Thomas Goff, Boone's
principal at Polacca. In March 1981 Baldwin met with
Goff and told him that Boone was being investigated for
sexual molestation of children. Goff replied that with-
out additional evidence, Boone could not be fired. 38
Five years later, Boone removed the clothes of Debra
Hood's ten-year-old son, again ostensibly to wash them
because they were dirty. Shocked by Boone's inappropri-
ate behavior, Hood reported the incident to Thomas
Goff. 39
Goff called Boone into his office. After Boone denied
the entire story, Goff simply told Hood she had better
be "damn sure" of what she was saying or she might
ruin Boone's teaching career. Goff then telephoned the
BI A Superintendent for Education at the Hopi reserva-
tion, Albert Sinquah. Sinquah directed Goff to contact a
federal labor relations officer and Boone was placed on
a three-day temporary leave. 40
Despite the previous reports by Sheriff Baldwin
against Boone, Goff and Sinquah did not contact any
law enforcement officials nor did they notify either
their superiors at the Office of Education Programs in
Gallup, New Mexico, or the BIA central office in Wash-
ington, D.C. The BIA officials simply dropped any fur-
ther action against Boone. By not pursuing the serious
charges against Boone, BIA officials permitted him to
continue teaching Hopi children and, consequently, to
molest them. 41
After the 1986 incident, Hood forbade her children
from going to Boone's house. In 1987, however, Hood's
children began to sneak over to Boone's house because
they liked watching videos there. One day Hood's
daughter peeked in a window at Boone's house and saw
Boone and her brother wrestling. While Boone and her
brother were wrestling, the girl entered the house and
stole a book entitled The Sex Book, which contained ex-
plicit pictures and definitions of sexual terms. 42
97
Later that night, after Hood's son went to sleep, the
girl gave her mother the book and told the disturbing
story of Boone wrestling with her brother. Confused
about what to do because of the BIA's previous lack of
action, Hood contacted a Hopi tribal court counselor,
who in turn contacted the FBI. In February 1987, the
FBI arrested Boone and made a shocking discovery in
his house. Boone had compiled a chart describing the
sexual activities he had engaged in with 142 boys.
Boone also had photo albums and videotapes of nude
boys. Based on this gruesome evidence, Boone pled
guilty in June of 1987 and was sentenced to life in
prison. 43
Tragically, the massive abuse at Hopi could have
been halted if BIA officials had responded to the serious
allegations against Boone. Even so, no BIA official was
ever disciplined or reprimanded for failure to report
Boone. Neither Goff nor Sinquah suffered any adverse
consequences as a result of their reporting omissions.
As Co-Chairman McCain stated during the hearings,
"Our commitment loses credibility if people who were
in supervisory positions are simply transferred to other
schools, rather than being held responsible for the ac-
tions that took place when they were in a supervisory
capacity." 44
Moreover, the BIA and Indian Health Service re-
sponse to the mental health crisis created by Boone was
wholly inadequate. Instead of implementing crisis inter-
vention plans, as is routinely done in public schools hit
by such traumatic events, the BIA had no outreach to
the parents of the students for six months. 45
While the. pain and anguish caused by Eoone festered
within the Hopi community, the BIA employed a coun-
selor at the Polacca Day School, Lee Cargile, who only
added to the acute stress of the sexually abused Hopi
students. Cargile questioned the students in exhaustive
detail concerning the most intimate facts of their abuse
and compiled his own chart of Boone's activities. Car-
gile even called representatives of the U.S. Attorney's
Office and asked for money to fly to New York to inter-
view John Boone in prison so that he could write his
own book about the Boone case. At the insistence of the
U.S. Attorney's Office in Phoenix, Cargile was removed
from the Polacca Day School. However, Cargile was not
disciplined for his behavior but was simply transferred
98
to the Reams Canyon Boarding School, only eleven
miles away. At Reams Canyon, Cargile sometimes acted
as principal, supervising some of the same students he
had inappropriately questioned at Polacca. 46
Other Cases of Sexual Abuse
Price and Boone were not the only pedophiles flour-
ishing in BIA schools during the 1980's. Terry Hester
applied to BIA in 1981 to teach at the Raibito Boarding
School on the Navajo Reservation. On his employment
application to BIA, Hester wrote that he had a previous
criminal arrest and listed the relevant Oklahoma statu-
tory code citation. Inexplicably, BIA officials failed to
look up the code citation. If they had checked the code,
they would have learned that Hester had been arrested
previously on a child molestation charge. 47
Hester escaped detection, however, and was hired by
BIA. Rather than seducing boys, Hester's technique was
to threaten and coerce them into sexual acts. After
Hester was arrested for molesting children at the Rai-
bito Boarding School, a BIA law enforcement officer fi-
nally checked the code and learned that it referred to
child sexual abuse. The officer also learned that Hester
had "skipped" trial on that charge in Oklahoma and
had fled to Arizona. Subsequently, Hester was returned
to Oklahoma, where he was convicted. No BIA officials
were ever disciplined for their failure to notice Hester's
prior arrest. 48
J.D. Todd also molested children at a BIA school on
the Navajo Reservation. Todd taught at the Greasewood
Boarding School for twenty-one years. After a new
counselor at the school heard stories of Todd's molesta-
tion activities from various children, she finally report-
ed him. Todd was investigated by law enforcement offi-
cials, but still some of his fellow BIA teachers testified
for Todd as character witnesses and otherwise at his
trial, claiming that the children were lying. The princi-
pal at the Greasewood School even arranged joint trans-
portation to the trial for both the teachers testifying for
Todd and the victims of Todd. Only after the U.S. Attor-
ney's Office intervened were the children provided sepa-
rate transportation. 49
99
BIA's Approach To Reporting Child Sexual Abuse
Price, Boone, Hester, Todd and others demonstrate
BIA's failure to protect Indian schoolchildren. That
these pedophiles could operate in BI A schools with no
systematic means of reporting can be traced in part to
the failure of BIA to issue any reporting guidelines and
Congress' failure to require them to do so. In 1974 Con-
gress passed the Child Abuse Prevention and Treatment
Act which mandated that state governments adopt min-
imum child abuse laws or forfeit federal aid. However,
Congress inadvertently omitted federal and Indian
lands from this requirement. Thus, BIA schools were
exempt from any sexual abuse reporting require-
ments. 5 ^
Since the passage of the Child Abuse Prevention and
Treatment Act of 1974, all fifty states have enacted and
strengthened their own reporting laws. Yet no federal
reporting law currently applies to federal schools on
Indian lands. Moreover, despite the actions of all 50
states, the BIA for years failed to institute its own re-
porting guidelines or ask Congress for a mandatory stat-
ute. 51
This regulatory gap tied the hands of the Cherokee
tribal leadership in 1974 when it asked BIA to investi-
gate Paul Price. Even today tribes are powerless to re-
quire BIA or the Indian Health Service to investigate
and report cases of suspected child abuse. Until
recently, tribal officials or parents of victims could not
even refer to internal BIA policies on child abuse re-
porting because they were nonexistent. Even though the
Price fiasco came to light in 1985, BIA's first official
policy on reporting sexual abuse was not issued until
December, 1987, and its first policy to strengthen the
background checks of potential teachers was not issued
until last year. 52
While the policies BIA has promulgated are an im-
provement over their previous lack of any reporting
procedures, they are still seriously flawed. There are no
criminal sanctions for failure to report and no protec-
tion from slander suits for those who do report child
abuse allegations. Thus, as in the Price case, teachers
who know of allegations may be frightened and intimi-
dated into not reporting their information. 53
100
A federal reporting law would inevitably lead to in-
creased reports of child sexual abuse and a need for
greater treatment services. Unfortunately, the treat-
ment of child abuse victims and offenders is currently
underfunded and understaffed. Many reservations have
neither licensed medical specialists to provide care to
victims, nor mental health professionals to provide
counseling. On the Hopi Reservation, the therapists
treating the children traumatized by Boone must travel
over 300 miles to their clients and are only available
four days a month. 54
Moreover, multi-disciplinary sexual abuse teams
trained in the issues of child sexual abuse are rare on
Indian reservations. Mental health treatment is not
only critical to relieving the depression and suicidal and
homicidal ideations that victims experience, but also
can help prevent victims from becoming future perpe-
trators. Paul Price, in fact, was sexually abused at the
age of eight and at least two of his victims are now con-
victed molesters. 55
Conclusion
Collectively, Price, Boone, Hester, Todd, and other
cases the Special Committee investigated demonstrate
BIA's gross negligence in reporting child molesters to
appropriate social service and law enforcement authori-
ties. After the Committee's investigation, Acting Assist-
ant Secretary for Indian Affairs Pat Ragsdale sent offi-
cial letters of apology from the BIA to the Hopi and
Cherokee tribes. As Secretary Ragsdale testified, "I'm
sorry it took a Special Committee investigation for us to
discover this breakdown in our system." 56
The administrative breakdown, however, signifies
fundamental institutional incompetence. BIA supervi-
sors refused to report credible allegations against their
employees and staunchly defended teachers who were
later convicted of molestation. With threats of slander
against those who pursued allegations, BIA officials sti-
fled detection and intimidated anyone who chose to
report allegations. BIA consistently refused to document
molestation allegations in the personnel files of accused
teachers, and routinely failed to investigate the back-
grounds of teachers it hired. Moreover, negligent BIA
officials were never disciplined by their superiors and
101
many were even promoted within BIA. Instead of adopt-
ing reporting standards, as had all 50 states, the BIA
for years failed to address known problems.
ENDNOTES
CHILD SEXUAL ABUSE IN FEDERAL INDIAN SCHOOLS
1 The Special Committee's examination of child sexual abuse in
BIA schools is not intended to de-emphasize the serious problem of
physical and sexual abuse of Indian children outside BIA schools.
2 William "Pat" Ragsdale, Acting Assistant Secretary for Indian
Affairs, Department of the Interior, Testimony, Hearings, Part 3,
Feb. 27, 1989 at pp. 259-61, 271; Dr. Arthur Justice, Dean of the
School of Education, University of South Carolina at Spartanburg,
Testimony, Hearings, Part 3, Feb. 21, 1989 at pp. 30-31; Debra
Hood Testimony, Hearings, Part 2, Feb. 9, 1989 at p. 274; Ollie
Locust Testimony, Hearings, Part 3, Feb. 21, 1989 at p. 23; Eliza-
beth Brintnall Testimony, Hearings, Part 3, Feb. 21, 1989 at p. 25.
3 Keneitha Haigler Testimony, Hearings, Part 3, Feb. 21, 1989 at
pp. 9-12; Patricia Tramper Testimony, Hearings, Part 3, Feb. 21,
1989 at p. 7; Elizabeth Shiek. Psychologist, Smoky Mountain
Health Clinic, Testimony, Hearings, Part 3, Feb. 21, 1989 at pp. 13-
14; Roxanne Howard, Juvenile Intake/Court Counselor, Eastern
Band of Cherokees, Testimony, Hearings, Part 3, Feb. 21, 1989 at p.
139.
4 Paul Price Interview, Butner Federal Correctional Institute,
Feb. 13, 1989; Justice at p. 29.
5 Id. at pp. 29-30.
6 Id.
7 Id.; Price Interview.
8 Justice at p. 30.
9 Prjcg Interview.
10 Id.; Price Testimony, Deposition, Feb. 13, 1989 in Hearings,
Part 3, Feb. 21, 1989 at pp. 318, 320; Locust at p. 28.
11 Id.; Locust Interview, Jan. 26, 1989. Typical of Prices seduc-
tion ploys was his bicycle contest. Price ostensibly conducted the
contest for his students as a motivational tool. However, the real
price the winner of the bicycle had to pay was consent to Price s
sexual abuse. Locust at p. 28; Shiek Interview, Jan. 26, 1989; Law-
rence Hill Interview, Jan. 26, 1989.
12 Hill Interview.
13 Price Deposition at pp. 317-18; Price Interview.
14 Tramper at p. 7; Tramper Interview, Jan. 27, 1989.
1 5 Hill Interview.
16 Price Deposition at pp. 317, 320; Price Interview.
17 Brintnall at p. 25; Brintnall Interview, Jan. 26, 1989; Justice
at p. 31; Glenn J. Bradley Testimony, Deposition, Feb. 15, 1989 at
pp. 6-8.
18 Justice at p. 31; Bradley Deposition at p. 8; Price Interview.
19 Brintnall at pp. 25-26; Justice Interview, Feb. 21, 1989; Bonnie
Cogdill Interview, Jan. 26, 1989.
(102)
103
20 Brintnall at p. 26, Locust at p. 28.
21 Price Deposition at pp. 320-21; Price Interview.
22 Price Deposition at pp. 321-22; Mary Widenhouse Testimony,
Deposition, Feb. 7, 1989 at pp. 20-21; Price Interview.
23 Locust at pp. 23-24; Locust Interview.
24 Widenhouse Deposition at p. 19; Roy Lambert Interview, Feb.
15, 1989.
25 Haigler at p. 8; Haigler Interview, Jan. 26, 1989.
26 Haigler at p. 8.
27 Id. at pp. 8-9; Haigler Interview.
28 Haigler at pp. 8-9.
29 Id.; Tramper at p. 6.
30 Paul Price, Indictment, filed Jan. 7, 1986, Western District,
North Carolina, U.S. District Court.
31 Haigler at p. 17; Tramper at p. 6; Price Interview.
32 Tramper at p. 6; Haigler at p. 11; Lambert Interview.
33 Price Deposition at pp. 319-20.
34 Justice at pp. 30-31; Locust at p. 24; Haigler at p. 9; Ragsdale,
Feb. 27 at pp. 259-60. Acting Assistant Secretary for Indian Affairs
William "Pat" Ragsdale added that BIA's communication of sexual
abuse incidents is "terrible." Id. at p. 262. «,.,,., ,,
35 Eloise Salholz, "Assault on the Peaceful: Indian Child Abuse,
Newsweek, Dec. 26, 1988 at p. 31.
36 Hood at pp. 273-75. , oi ._
37 Larry K. Baldwin, former Navajo County Deputy Sheriff,
Interview .
38 Baldwin also reported the allegations concerning Boone to
then-Chief of the BIA Police at Hopi, Ivan Sidney. Id.
39 Hood at pp. 273-75. , w
40 Id.; Kenneth G. Ross, Assistant Director, South and West
Agencies, Education Operations, Office of Indian Education Pro-
grams, BIA, Prepared Statement, Hearings, Part 3, Feb. 21, 1989 at
p. 349.
41 Ragsdale, Feb. 27 at p. 260; Albert T. Sinquah, Prepared State-
ment, Hearings, Part 3, Feb. 21, 1989 at p. 357.
42 Hood at p. 275.
43 Id.; David Small, Supervisory Special Agent, Phoenix Division,
FBI, Testimony, Hearings, Part 3, Feb. 21, 1989 at pp. 41-42; Hood
Interview, Feb. 9, 1989.
44 Senator John McCain, Co-Chairman, Special Committee on In-
vestigations, Hearings, Part 11, June 8, 1989 at p. 12; Ragsdale,
Feb. 27 at p. 260; Hood Interview.
45 "Sylvia" Testimony, Hearings, Part 2, Feb. 9, 1989 at p. 280;
Hood Interview. William Mehojah, Branch Chief, Office of Indian
Education Programs, BIA, testified that BIA has never engaged in
crisis intervention. Mehojah Testimony, Hearings, Part 3, Feb. 21,
1989 at p. 90. TT .
46 David Breault, Clinical Social Worker, Testimony, Hearings,
Part 3, Feb. 21, 1989 at p. 114; Ross at p. 82; Ragsdale, Feb. 27 at p.
260; Breault Interview, Feb. 21, 1989.
47 Mehojah at p. 75.
48 Id.; Ross at p. 92; Small Interview, Feb. 21, 1989.
49 Small at p. 42; Christine Brown, Assistant Branch Chief,
Indian Education Programs, BIA, Testimony, Hearings, Part 3,
104
Feb. 21, 1989 at pp. 89-90; Brown Interview, Feb. 21, 1989. After a
lengthy jury trial, Todd was found guilty in an Arizona federal dis-
trict court on thirteen counts of sexual molestation and was sen-
tenced to 99 years in federal prison. However, the Ninth Circuit
Court of Appeals ordered a new trial because the children could
not precisely identify the dates of the sexual abuse and the jury's
factual determination was held to have been improperly influenced
by the prosecution's use of an expert witness who presented testi-
mony on the trauma of sexual molestation.
50 42 U.S.C. § 5101; Howard Davidson, National Legal Resource
Center for Child Advocacy and Protection, Testimony, Hearings,
Part 3, Feb. 22, 1989 at pp. 128-29.
51 Id.
62 Hilda Manuel, Chief Judge, Tohono O'Odham Judiciary, Testi-
mony, Hearings, Part 11, June 8, 1989 at p. 32; Ragsdale, Feb. 27 at
p. 261; Bradley Deposition at pp. 6-8.
53 Justice at p. 32. Acting Assistant Secretary Ragsdale noted, "I
would agree with the Secretary [Lujan] that I think federal legisla-
tion is needed to provide criminal penalties [for failure to report] as
well." Ragsdale Testimony, Hearings, Part 11, June 8, 1989 at p.
13.
54 The number of criminal complaints in South Carolina in-
creased by 20 percent after the state enacted a mandatory sexual
abuse reporting law. Justice at p. 33; Kenneth Hodder, Clinical
Social Worker, Testimony, Hearings, Part 3, Feb. 22, 1989 at p. 107;
Hodder Interview, Feb. 21, 1989.
55 Shiek at p. 15; Price Interview; Shiek Interview.
86 Ragsdale, Feb. 27 at p. 250; Ragsdale, June 8 at p. 12. See
Letter, William Ragsdale, Acting Assistant Secretary for Indian Af-
fairs, U.S. Department of the Interior to Ivan Sidney, Chairman,
Hopi Tribe, Hearings, Part 3, Feb. 27, 1989 at pp. 675-76.
CHAPTER 3
THE FEDERAL GOVERNMENT AND AMERICAN
INDIAN NATURAL RESOURCES
Natural resources are among the most important
assets to American Indians and indeed represent the
key to economic development for many. 1 In 1987, Amer-
ican Indians received more than $88 million from crude
oil and natural gas production alone on their lands.
These payments are made both to tribes with oil and
gas interests and individual Indian owners, called "al-
lottees," and often represent their primary source of
income. 2 Yet despite the federal government's long-
standing obligation to protect Indian natural resources,
they have been left unprotected, subject to, at best,
benign neglect and, at worst, outright theft by unscru-
pulous private companies.
The Theft of Oil and Natural Gas
The Committee found that simple "smash-and-grab"
theft— stealing entire tankfuls of crude oil by force-
rarely occurs; but sophisticated and premeditated theft
by mismeasuring and fraudulently reporting the
amount of oil purchased has been the practice for many
years of the largest purchaser of Indian oil in the
United States and others. The Department of the Interi-
or and its relevant agencies, charged with stewardship
of federal and Indian land, have knowingly allowed this
widespread oil theft to go undetected for decades, at the
direct expense of Indian owners. 3
THE CASE OF KOCH OIL
Koch Oil ("Koch"), a subsidiary of Koch Industries
and the largest purchaser of Indian oil in the country,
is the most dramatic example of an oil company steal-
ing by deliberate mismeasurement and fraudulent re-
porting. 4 Although Koch is also the largest independent
purchaser of crude oil in the United States and Canada
(105)
106
and the largest in Oklahoma, the company pilfered ad-
ditional oil from American Indians and others. 5
Koch's practice of sophisticated oil theft is carried out
primarily by gaugers, the field personnel responsible for
the measurement of crude oil. Gaugers are typically
representatives of an oil company purchasing oil at a
lease site. Their responsibility is to accurately measure
the oil purchased from the producer and transported by
truck or pipeline to the purchaser's facilities. Because
there is usually no representative of the producer at the
wells, purchasers measure oil under an "honor
system.' 6
Gaugers must report the oil measured and purchased
on documents called "run tickets." Oil measurement in-
volves accurately measuring both the quantity and
quality of the crude oil. The quantity is measured by
gauging the depth of the oil in the producer's storage
tanks adjacent to the wellhead prior to pumping ("top
gauge"), the depth of the oil left in the tank after it is
pumped out ("bottom gauge"), and the temperature of
the oil to correct for expansion or contraction. The qual-
ity is determined by measuring the gravity and percent-
age of impurities in the oil ("Basic Sediment and
Water" or BS&W). Koch gaugers were instructed to
misstate each of these elements in the company's favor
and fraudulently report their phony measurements on
the run tickets. 7
A purchaser's gauger who acquires more oil from a
lease site than his company actually pays for is often
said to be "long" or "over," while a gauger who takes
less oil than his company bought is "short." If gaugers
measure accurately, they should show little deviation,
at most very slightly "short" or very slightly "over"—
but never consistently "over." 8
Internal Company Data
The Special Committee subpoenaed internal company
data from more than 30 natural resource companies
representing over 80 percent of all oil and gas produc-
tion on Indian lands. Koch's data shows that during the
last three years it was consistently "over" each year, ac-
quiring $31 million more oil than it paid for, including
more than $10 million in Oklahoma alone. The records
further indicate that about one-quarter of Koch's 1988
profits in crude oil can be attributed to obtaining oil it
107
did not pay for. 9 By contrast, the records of some of
Koch's comparable competitors, including Phillips,
Kerr-McGee, Conoco and Sun, demonstrate that they
did not consistently acquire large amounts of crude oil
they did not pay for. 10
More important, rather than rely on internal data,
the Special Committee mobilized its own surveillance
team to observe Koch employees in action and inde-
pendently monitor their oil measurements by covert
^back-gauging." The FBI and Committee investigators
also interviewed numerous supervisors and current and
former employees of Koch, some under oath and others
in tape-recorded confessions. Indeed, the Committee's
own investigation indicates that Koch's figures, which
already admit to more than $31 million in oil acquired
by the company but not paid for in the past three years,
are inaccurate and considerably understated, since they
fail to fully reflect the theft admitted by Koch person-
nel on Indian lands. 11
Surveillance by the Special Committee
FBI Special Agent James Elroy, along with Commit-
tee oil investigators and accountants, selected Indian
leases throughout Oklahoma. Using livestock and trees
for cover while hiding in ditches, Special Committee in-
vestigators staked out eight remote oil lease sites under
covert surveillance. On each site, they also performed
complete back-gaugings, or remeasurements, to check
the oil purchaser's measurements. The same surveil-
lance and back-gauging techniques, including extensive
photographic and other documentation, were used on all
the leases. 12
The Special Committee found oil theft on six of the
eight leases. Koch Oil was the purchaser on all six
leases where theft occurred. Sun Oil and Vintage Oil
were the purchasers at the two leases where oil was
measured accurately. 13
On an allottee lease in Caddo County, Oklahoma, for
instance, Special Committee investigators determined
that the Koch gauger was completely falsifying run
tickets. Rather than actually measure the oil at the
lease site, the gauger simply recorded false numbers in
Koch's favor on his run tickets, for example, inflating
the temperature by as much as 19 degrees. 14 On an-
other Indian lease in Osage County, Oklahoma, Koch's
108
gauger fraudulently reported increases in the oil's tem-
perature by as much as ten degrees, while doubling the
impurities in the oil. The four other surveillances of
Koch personnel revealed similar fraud, allowing Koch
to acquire more oil than it paid for. 15
Interviews and Depositions of Current Koch Employees
FBI Agent Elroy and Special Committee investigators
interviewed and deposed current Koch employees, who
corroborated the widespread oil theft practiced on
Indian and other lands. For example, the Caddo gauger,
responsible for measuring 260 to 300 tanks monthly, ac-
knowledged consistently inflating the measurement fig-
ures to ensure that he was never "short," i.e. delivering
less oil than he bought. He stated that he falsified all
his reports so that Koch would gain oil it did not pur-
chase because his superiors at Koch continually pres-
sured him never to be "short," while giving him a
"book" which indicated what his gaugings should read.
His calculations were never questioned by the company
because he was always "long" by obtaining more oil
through false reporting than Koch paid for. 16
Other Koch gaugers involved in oil theft from Indian
lands, unlike the Caddo gauger, actually did perform
gauging; but none of them truthfully represented the
amount of oil they purchased. When interviewed by
Committee investigators, they confessed to intentionally
falsifying all or portions of their run tickets. Some
gaugers acknowledged that they had never even used
their thermometers since Koch took over the company
for which they previously worked, the Bigheart Oil
Company. * 7
Indeed, Koch gaugers who worked for Bigheart before
its 1987 takeover by Koch noted the marked contrast
between the two companies. Bigheart had always
stressed accuracy in oil measurement. If an employee
were consistently either "long" or "short," he was sub-
ject to termination. To enforce accuracy, Bigheart even
hired investigators and installed extra meters to spot
check gaugers. The gaugers never knew when they were
being watched, and, most important, the company put
no pressure on them to be "long." Following the takeov-
er, Koch removed Bigheart's meters used to recheck ac-
curacy and instituted the "Koch method." The same
gaugers who were caught stealing oil for Koch acknowl-
109
edged that they began intentional mismeasuring only
after Bigheart was taken over. 18
Koch gaugers told Committee investigators that they
received constant pressure from their superiors, during
what Koch called "continuous improvement meetings,"
never to be "short." The gaugers were specifically in-
structed to engage in "volume enhancement," bumping
the temperature about 10 degrees, taking anywhere
from one to four inches of oil off the gauge, and increas-
ing the sediment and water. 19
One current Koch field supervisor even admitted to
Committee investigators that he had been trained in
the "Koch method" of gauging, i.e., to "bump the
bottom gauge" and "cut the top gauge" to take any-
where from half an inch to three or four inches of oil,
depending on whether anyone was watching. If someone
were observing him, the gauger was to be modest in his
mismeasurement to avoid detection. If no one was
watching, the gauger could use his discretion. Koch
Service's Vice President for Operations testified that
Koch engaged in an "aggressive approach to purchasing
crude oil," and that any gauger who was regularly
"short" would probably be taken off gauging and put
"back into the maintenance crew," while any gauger
who was regularly "long" would be left to continue. 20
Former Koch Gaugers and Oil Producers
Former Koch gaugers throughout the country report
remarkably similar stories. James Spalding, a Koch
gauger in New Mexico from 1984 to 1988, testified that
he was trained by the company to falsely increase the
oil temperature, reduce the top gauge measurement,
add to the bottom gauge, and increase the impurity
level or BS&W. All of these "adjustments" served one
purpose: to allow Koch to take oil without paying for it.
When Spalding resisted and ceased practicing the
"Koch method" of gauging, his supervisors pressured
him to resume the theft. As far as Spalding knew, the
"Koch method" was followed by all Koch gaugers. Accu-
rate measurement would only occur when a pumper or
operator was present to check the calculation. Company
supervisors would falsely insist that their gaugers were
"short" to keep the pressure on them to use the "Koch
method." 21
110
Numerous other Koch employees recount similar ex-
periences. Donald Stark, employed by Koch Oil as a
gauger from 1968 to 1985, was pressured to engage in
"volume enhancement." When asked to summarize
Koch's gauging policy, he said, "They damn sure were
crooked." 22 Steve Chin, who had been one of Koch's top
supervisors in North Dakota, stated that:
The managers and we supervisors are hollered
at so severely whenever there is a slightest
shortage that they incorporate a permanent
overage into their operation. All the gaugers
run "long" because they are so afraid of the
flack we'll receive if they are ever "short." 23
According to Bill Kirtin of Tyler, Texas, a Koch super-
intendent who worked for the company from 1979 to
1986, run tickets were routinely falsified, including arti-
ficial increases in both temperature and sediment con-
tent, as well as misreporting the oil level in storage
tanks. 24 Dennis Krocker, a Koch employee for six years,
acknowledged the same gauging practices:
When "long," there seems to be a feeling of ju-
bilation among the gaugers and management
personnel which encouraged gaugers to always
be "long." Among all management personnel,
Koch's gauging procedures were designed, in
their opinion, as an extra revenue-producing
tactic for Koch Oil. 25
Indeed, statements from more than 50 ex-employees
and corporate officers were remarkably similar, ac-
knowledging a widespread corporate practice of oil theft
by fraudulent mismeasuring and reporting. 26 In fact, a
former member of Koch's Board of Directors told the
Committee that he had raised questions with top Koch
management as to why the company had large "over-
ages" and failed to receive a valid explanation. 27
The State of North Dakota has also found that in just
three years Koch took more than $4 million worth of oil
by mismeasurement in North Dakota alone. In addition,
at least four producer oil companies have all caught
Koch mismeasuring oil purchased from them. 28
Ill
R. W. Rivas and Gene Poteet
Koch's corporate practice of oil theft is epitomized by
the story of R. W. Rivas and Gene Poteet, two Koch
gaugers. Poteet testified before the Committee that he
was instructed by Koch supervisors to unilaterally
adjust measurements, such as the gauges, temperature
and sediment factor or BS&W, in the company's favor.
Soon after Poteet began working for Koch, he learned
that instructions in oil theft were commonplace at Koch
and among other independent oil companies. Indeed,
Poteet's nephew worked for another independent oil
purchaser and was told that if he were unable to "steal
his wages," he was not needed. 29
After Poteet left Koch, he became a pumper for an oil
producer in New Mexico, where he experienced first-
hand, from the other side, the "Koch method" of meas-
urement. Poteet was in an unusual situation. Most oil
leases are isolated and lack the supervision that Poteet
gave to those under his control. However, Poteet uti-
lized an active system of "back-gauging." 30
Poteet consistently found false measurements in the
company's favor recorded on Koch run tickets and even-
tually caught R. W. Rivas, who had taken over Poteet's
old job at Koch, repeatedly stealing oil for Koch. Poteet
confronted Rivas, who thereafter stopped stealing from
leases on Poteet's watch. Nevertheless, other producers
subsequently caught Rivas and cancelled contracts with
Koch. But Koch did not fire R. W. Rivas; instead the
company moved him to Oklahoma, where he continued
to fraudulently report oil purchased by Koch. 31
Apache Corporation, a major oil and gas production
company active on Indian lands, caught Koch gaugers,
including Rivas, systematically stealing oil in Oklaho-
ma. When confronted by Apache security officers, Rivas
admitted that Koch supervisors had applied "a tremen-
dous amount of pressure." As a result of analyzing only
five of the many Apache wells from which Koch was
purchasing oil, Apache submitted a claim for approxi-
mately $100,000 in lost revenue for one year alone,
which Koch promptly paid. 32
Rivas had caused Koch to lose contracts in New
Mexico; he and another gauger cost the company
$100,000 in claims in Oklahoma. But instead of being
112
dismissed, he continued to work for Koch in Corpus
Christi, Texas, still ' 'measuring' ' oil. 33
Koch 's Response
Charles Koch, Chief Executive Officer and Chairman
of the Board of Koch Industries, and other top Koch ex-
ecutives denied under oath before Committee investiga-
tors that the company was stealing by fraudulently re-
porting the amount of oil measured and purchased.
While Charles Koch and other executives confirmed the
company's own records indicating that Koch was taking
more than $10 million a year of crude oil it did not pay
for, Chairman Koch offered that:
[Oil measurement] is a very uncertain art. . . .
And you have people [measuring] who aren't
rocket scientists. . . . [N]o one can ever make
an exact measurement. . . . There is a lot of
uncertainty . . . and you [have] got tremendous
variations. 34
Many comparable companies' records subpoenaed by
the Committee, however, including Sun, Kerr-McGee,
Phillips and Conoco, show no substantial "shortages" or
"overages," and indicate that they did not acquire a sig-
nificant amount of crude oil without paying for it. 35
Although Koch officials were offered a further oppor-
tunity to testify under oath during public hearings, sub-
ject to cross-examination, they declined to do so. In-
stead, they issued a statement to the press which
claimed that the Committee's investigation was fueled
by Charles Koch's dissident brother William (and, by
implication, was thereby somehow false) and that Koch
was a minor player on Indian land, when in fact it is
the largest purchaser of Indian oil in the United
States. 36 After the hearings, Koch also attempted to
look into the personal backgrounds of Committee staff.
One Koch employee in Oklahoma even went so far as to
interview the ex-wife of a Committee investigator about
the circumstances of their divorce. 37
The Committee has forwarded the case against Koch
to the Department of Justice for criminal investigation.
THE OVERALL PROBLEM
Subpoenaed data and other testimony indicate that
independent oil companies besides Koch may have en-
113
gaged in a practice of oil theft on Indian land by fraud-
ulent mismeasurement. 38 It is impossible, however, to
quantify the amount of oil theft which has occurred.
Clearly not limited to Koch alone, without question it is
in the millions of dollars. 39 According to FBI Special
Agent Elroy, the Committee's investigation demon-
strates "that the theft is widespread and pervasive and
[the Indians] are being horribly victimized. . . . The
American Indian people are being grossly cheated out of
a lot of money." As Special Agent Elroy further stated,
"If we had six out of eight banks that we staked out
being robbed, we would be extremely concerned that
this is a pervasive problem." 40
Theft is by no means limited to oil. Natural gas, in
fact, is more easily stolen through fraudulent mismea-
surement than crude oil. The Committee uncovered evi-
dence to indicate that some companies were stealing
natural gas by similar sophisticated mismeasurement
techniques. Indeed, on the Southern Ute Indian Reser-
vation, 76 percent of the gas meters independently
tested for the Committee were calibrated to allow mis-
measurement, whether by negligence or by theft. More-
over, internal data of one of the largest natural gas pro-
ducers in the United States, with substantial Indian
production, shows that in 1987, through mismeasure-
ment, natural gas purchasers received at least $9.5 mil-
lion worth of natural gas they never paid for. 41
Most tellingly, the Special Committee's findings were
the result of but a few months' work with limited man-
power and resources. If the Special Committee could un-
cover, in a short time, such a widespread pattern of
fraud affecting American Indians, why has the Depart-
ment of the Interior, charged with the responsibility to
protect Indian natural resources, failed to do likewise?
The answer is a familiar one: American Indians again
have placed their trust in federal entities, seemingly
mobilized and watchful, but in reality dormant and im-
potent.
THE INADEQUACY OF FEDERAL PROTECTION AGAINST OIL
THEFT
The Bureau of Land Management (BLM) of the De-
partment of the Interior is the agency charged with
being the "watchdog" to detect and prevent the theft of
crude oil and natural gas from Indian land. This duty
114
has been expressly delegated to BLM's Inspection Divi-
sion, which employs full-time inspectors and other ex-
perts who are specifically tsteked as one of their primary
responsibilities with monitoring federal and Indian oil
and gas leases to uncover and prevent theft. These in-
spectors, however, lack law enforcement authority and
powers. Consequently, they must report all suspected in-
cidents of theft to proper law enforcement authorities,
such as the FBI. 42
The BLM Inspection Division's Tulsa, Oklahoma re-
gional office, with at least nine full-time inspectors cov-
ering Oklahoma, Kansas, and three-fourths of Texas,
since 1981 has recorded only nine isolated thefts from
Indian land, valued at a grand total of $20,490. The fol-
lowing chart represents the sum total of BLM's efforts:
BLM RECORDED OIL THEFT FOR OKLAHOMA INDIAN
LAND 43
Year Date reported Oil barrels Value
1981 None None
1982 None None
1983 None None
1984 July 24, 1984 72 $1,080
1984 Aug. 2, 1984 228 3,420
1984 Dec. 31, 1984 120 1,800
1985 Apr. 30, 1985 80 1,200
1985 May 30, 1985 160 2,400
1985 Oct. 8, 1985 180 2,700
1985 Oct. 28, 1985 175 2,625
1985 Oct. 28, 1985 196 2,940
1986 June 18, 1986 155 2,325
1987 None None
1988 None None
1989 None None
Total...., 1,366 $20,490
At that, the BLM inspectors have detected no theft
themselves, but merely have logged reports of theft
called in by lease operators. Inspectors have relied total-
ly on industry reports and have instituted no competent
back-gauging or surveillance program, which would be
capable of detecting sophisticated Koch-type theft in-
115
volving fraudulent reporting. At the same time, BLM
officials actually agreed with other expert witnesses
before the Committee that the opportunity to steal
crude oil from Indians by fraudulent mismeasurement
and reporting is "wide open," a self-fulfilling prophecy
given their complete lack of oversight. 44
BLM officials even failed to report to appropriate law
enforcement authorities the pitifully low incidence of
theft they logged. Only in one or two instances did BLM
simply telephone law enforcement officials, and still no
report or file was forwarded, or any follow-up ever
made 4 *^
At the same time, six of the largest oil companies on
Indian land testified under oath to the Committee that
they initially reported possible oil theft to the BLM.
However, after their first reports, the companies were
never contacted by BLM to provide any details. BLM
did not interview company officials or seek any docu-
ments. Once a theft report was made, it was dropped.
Consequently, most companies simply stopped bothering
to report theft to an agency that refused to even return
their phone calls. 46
In the face of such overwhelming proof of complete
incompetence, the explanation offered by the responsi-
ble BLM supervisor was that he did not know oil com-
pany security personnel to learn of possible leads, nor
could he contact the FBI to report possible violations. 47
Robert Goodman, Director of BLM Oil and Gas In-
spection for Eastern Oklahoma, testified that he failed
to contact the FBI regarding oil theft because he "didn't
have the proper telephone number." The sad truth is
that the nine BLM inspectors in Oklahoma, according
to their supervisor, spent 75 percent of their time in the
office, not out in the field where theft could be detected.
As the chart above indicates, the result is that at least
nine full-time BLM inspectors annually recorded only
$20,490 in oil theft from Indian lands in nine years. By
contrast, the Special Committee uncovered millions in
oil theft after only two months of investigation. 48
Ironically, in December 1988, the BLM inspection
force even received a specific report of possible oil theft
by Koch Oil on Creek Indian land in Oklahoma. As of
May 10, 1989, the date of the Special Committee's public
hearing on BLM, no actual investigation of Koch had
116
ever been conducted by BLM. In a model of bureaucrat-
ic double-speak, Goodman offered:
It has been in a level II inspection status, and
we are still dealing with that. It was going to
be an interim production verification program,
but now, since we know that we have problems
with Koch, it will go into a full scale produc-
tion verification. 49
Five months after receipt of the complaint, BLM had
absolutely nothing to show for its efforts, while it took
the Special Committee but a few months to discover
widespread oil theft by Koch and other companies.
Nonetheless, George Brown, BLM's Deputy Assistant
Director in Washington, with overall charge of the
entire inspection program on Indian lands, testified that
BLM was fulfilling its responsibility to American Indi-
ans "appropriately and adequately." He further testi-
fied that Goodman, in particular, was fully meeting his
responsibilities as an inspector when his office uncov-
ered only $20,490 in oil theft from Indian lands in nine
years. 50
Chairman DeConcini even asked Brown if the failure
to find the FBI's phone number to report theft was
meeting BLM's responsibility, and Brown defiantly
countered:
I would tell you, Senator, that Mr. Goodman
is meeting his responsibilities as an inspector.
I'm sure that today he is aware of where to
find the telephone number for the FBI, and I'm
sure when he returns he will be able to contact
them if necessary. 51
Chairman DeConcini, holding up the Tulsa telephone
book, responded:
I'll show you where to find it. It's right there.
You don't even have to look it up. It is on the
front page. 52
When questioned by Chairman DeConcini on the last
day of Committee hearings, Secretary of the Interior
Manuel Lujan Jr. pledged that BLM would follow the
lead of Committee investigators in catching oil theft on
Indian lands. "If your guys did better than ours did,"
testified Secretary Lujan, "you can be sure that ours
will do better than yours." Apparently, the urgency of
117
the Secretary's message was not understood by some
BLM officials. During a meeting of the BIA/BLM/MMS
Steering Committee in response to the Special Commit-
tee's hearings, a BLM representative expressed little
concern about the theft of Indian oil by fraudulent
measurement, saying that the "problem is more in
terms of public relations. [BLM is] working with
RMOGA [a trade association of oil companies, including
Koch] on the issue. BLM will be asking industry to
defend industry practice with no need for change." 53
The Royalty Payment System
indian royalties: breakdown in the payment process
Apart from outright oil theft, Indians can be deprived
of their full oil income by a breakdown in the royalty
payment system itself. Royalties represent a share-
typically ranging on Indian land from 12 V2 to 20 per-
cent—of the value of total oil and gas production, free
of production costs. Royalties may be paid by the actual
producer of oil or gas, or by a purchaser, depending on
the selling arrangement. 54
The calculation and payment of royalties by oil and
gas companies on Indian lands operates in much the
same fashion as federal taxes. Companies, like taxpay-
ers, calculate the royalty owed based on intricate feder-
al laws and regulations they must interpret. Under this
honor system, each month the companies submit their
Indian royalty checks and accompanying data to the In-
terior Department's Minerals Management Service
(MMS), the federal agency charged with the collection
and accounting of federal and Indian royalties. 55
When interpreting royalty calculations, company pay-
ments are usually made in good faith. However, like
any honor system, including taxes, companies interpret
royalty calculations in their self-interest and normally
err on the side of underpayment. Moreover, unlike fed-
eral or private royalties, Indian royalties are governed
by unique federal regulations and lease provisions de-
signed to maximize Indian income. Because these re-
quirements are highly complex, they not only pose an
added burden on companies, but additional opportuni-
ties for favorable interpretation. Often companies
simply fail to adjust their accounting procedures to re-
flect the unique nature of Indian royalties since they
118
comprise such a small percentage of the literally mil-
lions of royalty accounting transactions handled by
these companies each month. 56
THE CAUSE OF ROYALTY UNDERPAYMENTS
Because the royalty calculation process is ultimately
controlled by the companies paying royalties, the Spe-
cial Committee placed under oath officials of the major
oil and gas companies responsible for paying more than
eighty percent of all Indian oil and gas royalties re-
ceived by the federal government in the past six years.
These companies operate and pay royalties on Indian
leases owned by twenty-four Indian tribes, as well as al-
lottees, located in more than eleven states. In addition
to reviewing massive records and sworn responses relat-
ing to the internal accounting procedures, policies and
business practices of the companies placed under oath,
the Special Committee contacted tribes located on min-
eral-rich reservations for their input. 57
From this information, the Special Committee has
identified two primary causes of royalty underpayment
by oil and gas companies active on Indian lands: im-
proper valuation of crude oil and natural gas for royalty
calculations, and improper deductions and allowances
taken from the royalty base. 58
Valuation of Oil and Gas
The Special Committee discovered that the compa-
nies' failure to perform majority pricing and other valu-
ation requirements is a serious cause of Indian royalty
underpayment. "Majority pricing" means that Indian
lessees and payors, when calculating royalties, must
value Indian oil and gas, at a minimum, equal to the
value of a majority of like-quality production sold at
arms length in the same field or area. 59
In an attempt to maximize Indian royalties, the feder-
al government has mandated majority pricing in the
calculation of most Indian oil and gas royalties, while
applying majority pricing more sparingly for federal
royalties. Particularly when an Indian royalty payor is
vertically integrated and transfers oil or gas to itself or
one of its affiliated companies, competitive market
forces do not come into play and the incentive to obtain
the highest price is absent. Therefore, in non-arm's-
length transactions, the royalty price or value could be
119
\
depressed and majority pricing would significantly in-
crease the value used to calculate Indian royalties. 60
Companies responsible for paying more than one-
fourth of all Indian oil and gas royalties testified to the
Special Committee that, even when oil or gas is trans-
ferred within the company or sold to an affiliated com-
pany, they do not perform majority pricing. Other com-
panies indicated that they do not perform majority pric-
ing for natural gas royalties. 61
From 1979 to 1983, Notice to Lessees Number Five
("NTL-5") required lessees, both Indian and federal, to
value gas at the sales price or the ceiling prices estab-
lished by the Natural Gas Policy Act (NGPA), whichev-
er is higher. Since 1987, NTL-5 has mandated that all
lessees use majority pricing when valuing natural gas
produced on Indian lands. 62
The Special Committee found that most companies it
placed under oath have never complied with either the
past or current NTL-5 requirements. Rather, they have
computed and reported Indian royalties using sales pro-
ceeds as value, and have virtually never attempted to
use majority pricing or NGPA ceiling prices in royalty
calculations. 63 In addition to majority pricing, the Com-
mittee found that companies routinely failed to use
other required accounting valuation methods, diminish-
ing Indian royalty income. 64
Deductions and Allowances From the Royalty Base
The other primary cause of underpayment of Indian
royalties is the unauthorized or improper taking of de-
ductions from the sales value of crude oil or natural
gas. These deductions include: state and county produc-
tion and property taxes; manufacturing/processing al-
lowances on natural gas; transportation charges; com-
pression and dehydration charges; and gathering, mar-
keting and administrative charges. 65
The Special Committee found that at least seven com-
panies, responsible for approximately one-third of all
Indian oil and gas royalties, have inappropriately de-
ducted the costs of transporting a product from the
lease site to a buyer. Companies responsible for more
than half of all Indian oil and gas royalties have deduct-
ed state and county taxes from Indian royalties, despite
a clear message from MMS that the deduction of such
taxes from the royalty basis should be limited. Other
120
payors of Indian royalties told the Special Committee
that they may have inappropriately taken manufactur-
ing and processing deductions. Indian tribes as well
have identified the improper taking of deductions to be
a major source of royalty underpayment, and have cited
deductions which, when later audited, were found to be
overstated by as much as 60 percent. 66
Estimating the Value of Underpayments
Two federal agencies, MMS and its predecessor, col-
lected approximately $600 million in Indian oil and gas
royalties from 1978 through 1982. From 1983 through
1987, approximately $500 million was collected by MMS
in Indian oil and gas royalties. 67
Due primarily to the causes identified above, the Spe-
cial Committee estimates that from 1978 through 1982
Indian oil and gas owners have been potentially under-
paid between $25 and $60 million. From 1983 through
1987, they have been potentially underpaid between $10
million and $25 million. 68
The decline in royalty underpayments is not simply a
result of refined federal oversight. Prior to 1982 the po-
tential for underpayments was at its greatest, as our
nation witnessed the highest oil and gas prices in its
history, no government agency was proficient in royalty
accounting, and interpretations of proper royalty valu-
ation were almost exclusively left to the companies.
Furthermore r very few tribes had developed any miner-
al accounting expertise. 69
After 1982 the price of oil and gas fell, causing a cor-
responding decline in the value of royalties. In addition,
the creation of MMS represented the federal govern-
ment's first serious effort to oversee royalties, and the
Federal Oil and Gas Royalty Management Act
(FOGRMA), related federal regulations, and litigation
resolved some controversial, large-dollar royalty issues.
Finally, during this period many Indian tribes with
energy resources established expertise to monitor their
royalties. Moreover, with the advent of tribal severance
taxes, tribes for the first time began to have access to
information relating to production on their leases.
Given the current oil and gas market conditions, in-
creased accountability afforded by systems improve-
ments at MMS, and the tribes' more direct and active
121
role in oversight, the potential for royalty underpay-
ments has decreased. 70
THE ROLE OF THE MINERALS MANAGEMENT SERVICE
In 1982 MMS was created in response to concerns
that the federal government's collection and accounting
of Indian and federal royalties were disorganized and
ineffective. MMS has performed commendably in as-
suming the royalty accounting and auditing functions
all but ignored by its predecessor, the United States Ge-
ological Survey. MMS has established both a computer
royalty accounting system that catches major reporting
errors and an organizational department devoted exclu-
sively to auditing companies responsible for Indian and
federal royalties. After years of refining its accounting
and auditing functions, MMS today successfully collects
and accounts for all but a small percentage of the
Indian royalties which it is responsible for overseeing. 71
MMS, however, allocates its limited resources to cover
as many royalty dollars as possible, and Indian under-
payments comprise less than a fraction of one percent
of all monies collected by MMS. Therefore, while in gen-
eral MMS has operated with increasing professionalism
and effectiveness, for Indian royalty owners MMS has
not prioritized either collecting this underpayment or
eliminating the causes of Indian underpayment de-
scribed earlier in this chapter. 72
Since royalty underpayment often results from a de-
fensible interpretation of complex rules, oil and gas
companies usually take the same approach as most tax-
payers: where there is doubt, they interpret the rules to
their own advantage, guarding against overpayment.
However, two congressional committees and a Presiden-
tial commission all concluded during the past seven
years that royalty underpayments were more common
than underpayment of taxes because "[penalties for un-
derpayment of royalties scarcely exist." 73
Today, MMS still has never collected any penalties in-
volving Indian leases. Only one company has ever re-
ceived as much as a notice of noncompliance relating to
an Indian lease. Even in the area of federal royalties,
MMS has collected only a trivial $74,000 in penalties
since 1983, although its annual federal and Indian roy-
alties and revenues exceed $4 billion. 74
24-087 0-89-5
122
While failing to impose penalties, the MMS account-
ing system by itself has failed to ensure that companies
calculate royalties using appropriate valuation methods
such as majority pricing and NTL-5 analysis, and that
companies do not take improper deductions. Instead,
MMS relies on auditing as its primary means to enforce
compliance with regulations and guarantee that Indian
royalties are maximized.
MMS, however, has audited less than one-third of all
Indian leases held by companies responsible for about
eighty percent of Indian oil and gas royalties. 75 More-
over, MMS does not use its accounting system to flag
for audit those companies that may be failing to follow
procedures and regulations enacted to maximize the
return of the Indian royalty owner. Not until 1985, in
response to congressional hearings, did MMS even set
aside a portion of its resources to audit Indian leases ex-
clusively, and only in 1988 did MMS formally adopt a
' 'comprehensive' ' audit strategy that emphasized Indian
leases. In fact, the Interior Department's Inspector Gen-
eral recently found that MMS was spending more than
a third of its audit resources on verifying industry
refund claims, rather than verifying the accuracy of
royalty payments. 76
The problem at MMS is not institutional incompe-
tence as at BIA, or direct antagonism towards Indian
interests as demonstrated by the callousness of BLM,
but lack of a clear direction and mandate concerning In-
dians. For years, companies paying Indian royalties
have been neither adequately audited by MMS nor suf-
ficiently penalized when they fail to specially account
for, and properly pay, Indian royalties. The problem is
that Indian royalties comprise such a small part of
MMS jurisdiction that they simply fail to be a priority,
in part because Congress has not instructed the agency
how much resources it should devote to Indian royal-
ties. While MMS has made considerable progress in col-
lecting and accounting for all royalties, the Indian roy-
alty still does not receive the attention to which it is en-
titled. 77
TRIBAL EFFORTS TO COLLECT ROYALTIES 78
Tribes recognize that no federal agency or private cor-
poration can appreciate their royalty interests better
than themselves. Although Indian royalties comprise a
123
small portion of MMS collections, they furnish much-
needed revenues to fund tribal agencies and provide
basic services to Indian families. 79
The Southern Ute Tribe has long realized the impor-
tance of the marketable oil, gas and coal that lay under
its reservation lands. With the formation of a tribal
Energy Resource Division in 1980, the Southern Utes
began to successfully assess their mineral assets. Armed
with this knowledge, the tribe has entered into profita-
ble deals with outside companies interested in extract-
ing and marketing natural gas, oil and coal. 80
The tribe has impressed industry and earned the re-
spect of companies seeking to extract minerals from the
Southern Ute Reservation. The Southern Ute Energy
Resource Division contains a formidable array of profes-
sionals, including in-house geologists and a mineral ac-
countant. Through the efforts of these tribal employees,
the Southern Utes have identified underpayments of
royalties owed to the tribe. For example, the tribe dis-
covered in late 1988 that an operator on Southern Ute
land was failing to report actual production of natural
gas to MMS, thereby withholding rightful royalties
from the tribe. 81
In response to increased mineral activity on their res-
ervation, the Wind River tribes have also developed ad-
mirable expertise. For example, the tribes have in-
stalled a sophisticated computer system to evaluate pro-
duction, sales, and valuation data from the tribes' 105
leases. In 1986 alone, this system identified approxi-
mately $300,000 in underpayment of royalties. Tribal
representatives testified that these underpayments stem
primarily from improper valuation of extracted re-
sources, such as the failure of companies to perform ma-
jority pricing. 82
Tribes have begun limited monitoring of royalties pri-
marily as a result of implementing severance taxes on
natural resources extracted from their lands. Because
MMS and company lessees until recently had complete
control of all information relating to royalty payments,
tribes never had access to data crucial to the calculation
of royalty payments. With the advent of tribal sever-
ance taxes, the tribes now for the first time have the
authority to demand that operators submit all informa-
tion regarding taxes on a timely basis. Tribes can thus
124
analyze this information to determine whether compa-
nies may be underpaying their royalties. 83
Despite the success of tribes in monitoring their own
royalties, their efforts in this area have been hindered.
Because MMS has sole authority to account for Indian
royalty payments, perform audits on Indian leases, and
enforce determinations of underpayments, tribes are
not free to identify underpayments and enforce collec-
tion. 84
The Southern Utes, for example, could not impose
penalties or interest on one operator's blatant withhold-
ing of royalties over a three year period and still wait
for the Department of the Interior to take action. When
a major oil and gas company was found to be flaring
natural gas without authorization on the Wind River
Reservation, the tribes had to wait for MMS to demand
and collect unpaid royalties. In 1988, almost two years
after the flaring was discovered, MMS finally sent a
letter to the company demanding unpaid royalties. 85
Tribes rarely receive federal funds to perform their
own monitoring of royalties. Although federal law
allows MMS to allocate resources to tribes for the pur-
pose of auditing tribal leases, MMS has not been imple-
menting this authority. 86 Since the creation of MMS,
only two tribes, the Navajo Nation and the Ute Tribe of
Utah, have entered into agreements with MMS whereby
funds are distributed to the tribes. Only two other
tribes, the Southern Utes and the Jicarilla Apache,
have obtained agreements where MMS provides staff re-
sources, rather than money, to the tribes. Some smaller
mineral-producing tribes do not even know that these
MMS agreements are available. 87
For the few tribes involved with such agreements,
MMS continues to retain enforcement control and ulti-
mately determine which leases will be audited. In im-
plementing its agreement for the first time, the Ute
Tribe of Utah recommended that MMS audit twenty-
two leases held by a major oil and gas company on their
reservation. For various reasons, MMS decided to audit
only three leases. 88
When underpayments are identified through audit,
delay and lengthy appeals are common. In two audits
performed by MMS and the Southern Ute tribe pursu-
ant to an agreement, almost $600,000 in underpayments
have been identified, but the tribe has waited over two
125
years for MMS to resolve appeals and enforce the audit
findings. 89
Indian tribes have also faced difficulties in their ef-
forts to regulate natural resource production on their
own lands. The Supreme Court's recent decision in
Cotton Petroleum v. New Mexico, interpreting federal
statutes, allows state and local governments, in addition
to Indian tribes, to impose severance taxes on compa-
nies producing natural resources on Indian lands.
Cotton Petroleum actually rejects the proposition that
Indian oil and gas income should be maximized when-
ever possible, and permits triple taxation, which can
total as high as 25 to 30 percent, to be imposed upon
Indian lessees. 90 In the presently depressed market for
oil and gas, energy production companies have indicated
that this tax burden alone could cause them to bypass
Indian country. 91
THE INDIVIDUAL INDIAN OIL AND GAS ALLOTTEES
Individual Indian allottee owners of oil and gas
throughout the country receive royalties on a regular
basis. These allottees own tracts of land which were al-
lotted for private Indian ownership by the federal gov-
ernment in the 19th or early 20th century. These lands
usually descend through generations by inheritance,
and are within the legal protection of the federal gov-
ernment as long as they remain Indian-owned. 92
Indian allottees face even greater difficulties than
tribes in understanding how oil and gas companies have
calculated their royalties. Allottees not only lack the
governmental resources of tribes, but have continued to
be neglected by BIA and MMS, the two agencies they
must rely on for the proper collection and protection of
their royalties. 93
The BIA 's Explanation of Payment Form
The BIA's neglect of allottees is epitomized by the
"Explanation of Payment" forms which accompany the
royalty checks of all allottees. These forms, created and
distributed by BIA, provide allottees with information
on oil and gas production and royalty calculation. 94
The BIA has completely bungled Congress' goal, an-
nounced almost seven years ago, to provide allottees
with clear and adequate information regarding their
royalty receipts. In early 1983, alarmed at the federal
126
government's poor handling of Indian and federal royal-
ties, Congress passed the Federal Oil and Gas Royalty
Management Act (FOGRMA). At that time, royalties to
Indian landowners were frequently late, reduced or sus-
pended, and unaccompanied by any coherent explana-
tion, often with serious consequences for impoverished
allottees. Congress' requirement that BIA design and
distribute an understandable Explanation of Payment
form was hardly a complicated or onerous assignment,
since industry had been providing private royalty
owners with clear and concise explanations for decades.
Ironically, private landowners adjacent to Indian lands
received a comprehensible Explanation of Payment
from industry, while their Indian neighbors next door,
after industry submitted its data to the federal govern-
ment, did not. 95
BIA's problems with the Explanation of Payment
forms continued even after FOGRMA was enacted. In
1985, two years after the passage of FOGRMA, allottees
were still not receiving any explanation of their royal-
ties. A House subcommittee also warned the BIA that
its intended design for the form would not provide the
minimum information needed for allottees to under-
stand how their royalty dollars were calculated. In 1986
the General Accounting Office again noted that BIA
had not yet sent Explanation of Payment forms to all
allottees, and that the information contained in the
form was difficult to comprehend and did not provide
royalty rates, as required by statute. 96
Today, the Explanation of Payment form continues to
be the source of much confusion, not only to allottees
but even to BIA employees themselves. Royalty rates
and other crucial information are "rolled up" into aver-
ages that sometimes lead to negative rates and incom-
prehensible numbers being printed on the form. Compa-
nies routinely take deductions and allowances that de-
crease royalties but are not explained on the form. The
Committee found that allottees still cannot comprehend
the Explanation of Payment forms and BIA employees
often cannot explain them. In fact, even the Director of
MMS admitted to the Committee that he cannot under-
stand the information printed on the current form, and
believes that it could be improved. 97
As in 1982, these unintelligible forms can have tragic
consequences for allottees. Mary Limpy, a Cheyenne-
127
Arapaho Indian from Oklahoma, is an allottee owner of
land containing crude oil. Physically unable to work,
she depends on royalty checks to feed and clothe herself
and her three children. But when Mary Limpy's royalty
checks suddenly stopped coming, her Explanation of
Payment forms were still indicating royalty ownership
and payment entitlement. She therefore could not qual-
ify for Oklahoma state welfare. And the BIA could not
give her a reason why her royalty checks stopped— or
even a form that indicated zero royalties so she could
receive state welfare. Unable to pay rent or support her
children, Limpy was forced to live in an abandoned
house and put her children up for adoption. Mary
Limpy also had to file suit in federal court to gain what
the government should have provided in the first place,
and sadly has still not received relief. 98
In early 1988 the royalty payments from Yvonne and
Richard Curry's Utah lease plummeted almost 90 per-
cent. The Currys were determined to discover why the
decline in their royalties was far greater than the corre-
sponding decline in oil prices. Unfortunately, the
Currys, like all allottees, must rely on the Explanation
of Payment form to answer questions about the proper
calculation of their royalty checks. To the Currys the
form was a mix of garbled numbers that meant nothing.
They approached various BIA officials for assistance,
but none of them could understand the numbers on
their own form."
Houston and Velma Decker, members of the Caddo
Tribe of Oklahoma, are a retired couple who receive
most of their income from an inherited allotment of
land producing natural gas. In March of 1988 the Deck-
ers received an unusually low check of $199. Their curi-
osity led them to analyze the Explanation of Payment
form provided by BIA each month with their royalty
check. In the words of Mrs. Decker, the form was "a
bunch of jumble." 10 °
The Deckers could not tell from reading the form
whether the proper lease royalty rate was being ap-
plied. In fact, the reported gas prices were suspicious.
One well on their property located less than two miles
from another well was receiving 16 percent more for
the same product. The forms contained negative figures
and gave no explanation for large allowances apparent-
ly deducted. 1 ° J
128
Allottees and the Unresponsive Federal Bureaucracy
When allottees like the Deckers, the Currys and Mary
Limpy suspect a problem with their leases, they must
turn to the BIA or MMS for answers. At times, these
agencies have simply ignored requests. At other times,
they have refused to furnish basic information, even
though it related to contracts to which the allottees are
parties. 102
After the Deckers realized that their royalty pay-
ments were unusually low, they sent a letter to the
BIA's Anadarko Area Office requesting assistance. The
letter was never answered, and five days later, the
Deckers received a mysterious royalty check from the
BIA without any explanation. The Deckers then phoned
the BIA office to inquire about their payments and were
told that the Realty Officer would get back to them. He
never did. 103
After seven months of attempting to contact BIA with
no response, the Deckers drove 250 miles to the BIA
Area Office to learn what was happening. During the
Deckers' visit, the Oil and Gas Realty Officer and the
Chief Realty Officer of the BIA Area Office both told
the Deckers that BIA could not answer the Deckers'
questions regarding their Explanation of Payment
forms. They suggested that the Deckers contact MMS in
Colorado— without even providing the Deckers an ad-
dress or phone number. 104
Ervin Chavez is the Navajo owner of allotted land in
New Mexico and knows firsthand the federal govern-
ment's failure to respond to allottees. He and other
Navajo allottees repeatedly contacted the BIA and
MMS to determine why their royalty payments were
anywhere from six months to over a year late, why the
information provided was slim, and why they were not
receiving any interest on their late royalty checks.
Members of Chavez' group often travelled hundreds of
miles to BIA offices, only to be told that BIA could not
give them any clear answers. It took a lengthy lawsuit,
continuing for almost five years, for Chavez and other
Navajo allottees to finally force BIA to address their
concerns and provide them the assistance they should
have received when the problems first occurred. 105
If allottees like Chavez need assistance from BIA,
they are directed to realty officers who are usually un-
129
aware of oil and gas industry practices and procedures.
When approaching MMS, allottees find an organization
more professional than BIA, but nonetheless ill-
equipped to meet allottee needs. 106
The Office of External Affairs, the only MMS office
dealing directly with allottees, employs three people
who merely provide desk reviews of leases when BIA is
unable to resolve allottee concerns. Currently, due to
limited resources, the office is handling almost exclu-
sively allottees' problems from Oklahoma, and is unable
to provide comparable attention to allottees in other
states. Given the lack of resources allocated to its Office
of External Affairs, MMS concedes that it may not be
meeting its responsibilities to Indian allottees. 107
Allottees rely totally on the federal government to
collect, account for and distribute royalties properly.
Many allottees, like Mary Limpy, live in poverty and
collect less than $3,000 . annually in royalties. Ten or
twenty dollars unaccounted for by MMS or BIA among
billions of federal royalties may seem insignificant, but
to some allottees, every dollar is critical income. 108
Other Failures of the Department of the Interior
the arkansas riverbed
In 1970 the U.S. Supreme Court held that the Chero-
kee, Choctaw and Chickasaw Nations, three of the four
largest Indian tribes in Oklahema, owned title to
ninety-six miles of Arkansas Riverbed lands in eastern
Oklahoma. Unfortunately, at the time of the decision,
the Riverbed lands were already occupied by hundreds
of private landowners who were, in effect, trespassers.
The tribes themselves were then, and are now, power-
less to evict the trespassers because by statute all evic-
tion actions on Indian lands must be substantiated by
surveys conducted and certified by the Bureau of Land
Management. Without the BLM surveys, the tribes are
barred from court. BLM, however, will only survey the
Riverbed land if it receives a request from BIA. The ul-
timate responsibility for initiating surveys of the River-
bed thus resides with BIA. 109
Even though BIA has been charged with this specific
responsibility since 1970, in 19 years it has obtained sur-
veys of * Letter, C. F. Larrabee, Acting Commissioner on Indian Af-
fairs to Jesse Wilson, Secretary of the Interior, Mar. 27, 1908.
112 Mankiller at pp. 2-3; Roberts at pp. 3, 8-9; Anoatubby at pp.
3-5; Confidential Interview with a Bureau of Indian Affairs official;
Merritt Youngdeer, Area Director, BIA (Muskogee, Oklahoma),
Testimony, Deposition, Apr. 19, 1989 at p. 7. When asked whether
the BIA had fully protected the tribal natural resources on the Ar-
kansas Riverbed, Jack Chaney, a BIA Trust Officer, testified, "We
would probably have to say we have not." Jack Chaney, BIA (Mus-
kogee, OK), Testimony, Deposition, Apr. 19, 1989 at p. 22.
113 Chaney Interview, Apr. 19, 1989.
114 Anoatubby at pp. 5-6; Tina Jordan, Attorney, Arkansas Riv-
erbed Authority, Testimony, Hearings, Part 10, May 18, 1989 at p.
19; Jordan Interview, May 18, 1989. n nnn
115 William Foster, Testimony, Hearings, Part 10, May 18, 1989
at pp. 14-15; Jordan Interview. The tribes also have lost between
$300,000 and $2 million per year in oil and gas revenues on River-
bed and non-Riverbed lands due to BIA's failure to lease subsurface
rights. Fischer at pp. 20-21.
116 William Walker, Vice President, Stephens Production Compa-
ny, Testimony, Hearings, Part 10, May 18, 1989 at pp. 23-25.
117 Jordan at p. 18.
118 Id. at pp. 17-19.
119 Curtis Canard, Tribal Geotechnical Services, Inc., Testimony,
Hearings, Part 9, May 16, 1989 at pp. 31-33, 45.
120 Id. at pp. 33-34.
121 Elmer Manatowa, Chief, Sac and Fox Nation, Testimony,
Hearings, Part 9, May 16, 1989 at p. 35; William Rice, Attorney
General, Sac and Fox Nation, Testimony, Hearings, Part 9, May 16,
1989 at pp. 44-45.
150
122 Canard at pp. 31-34.
123 Timothy Vollmann, Southwest Regional Solicitor, Depart-
ment of the Interior, Testimony, Hearings, Part 9, May 16, 1989 at
p. 51; Joe Walker, Assistant Area Director, BIA (Anadarko, Okla-
homa Office), Testimony, Hearings, Part 9, May 16, 1989 at p. 49.
The Sac and Fox and Cherokee Nations have finally received in-
creased attention to their litigation delay problems due to the ar-
rival in 1988 of Southwest Regional Solicitor Tim Vollmann. Man-
killer Interview, May 17, 1989; Manatowa Interview, May 16, 1989.
124 Truman Carter, Treasurer, Sac and Fox Nation, Testimony,
Hearings, Part 9, May 16, 1989 at pp. 38, 44.
125 Ralph Tarr, Solicitor, Department of the Interior, Statement,
July 19, 1989. See Oklahoma Tax Commission v. Graham, 109 S. Ct.
1519 (1989); Mississippi Band of Choctaws v. Holyfield, 109 S. Ct.
1957 (1989).
126 Letter, Mille Lacs Band of Chippewa Indians to Special Com-
mittee on Investigations, Feb. 23, 1989.
127 Reid Chambers, Testimony, Hearings, Part 1, Jan. 30, 1989 at
p. 68; Dennis Daugherty, former Associate Solicitor for Indian Af-
fairs, Department of the Interior, Interview, Sept. 18, 1989.
128 Issue Paper/Report: "Spokane Reservation Open-Pit Urani-
um Mine Reclamation," Bureau of Indian Affairs, Sept. 1987 at pp.
1-5, 7.
129 Id. at pp. 6-7.
130 Id. at p. 7; Joe Flett, Chairman, Spokane Tribe, and Bruce
Wynne, Spokane Tribal Councilman, Interview; Marjane Ambler,
"The Lands the Feds Forgot," Sierra Magazine, May/ June 1989 at
pp. 44-48.
131 Id.
132 30 C.F.R. 750.6; Michael O'Connell, Attorney, Hopi Tribe, Tes-
timony, Hearings, Part 10, May 18, 1989 at pp. 35-36, 39; Ivan
Sidney, Chairman, Hopi Tribe, Testimony, Hearings, Part 10, May
18, 1989 at pp. 33-34.
133 O'Connell at pp. 35-36, 39.
134 Harold Bentley, Hydro Geochem, Inc., Testimony, Hearings,
Part 10, May 18, 1989 at pp. 37-40.
135 O'Connell at p. 39.
136 Richard Baldes, Project Leader, Fish and Wildlife Manage-
ment Office, U.S. Fish and Wildlife Service (Lander, Wyoming),
Testimony, Hearings, Part 9, May 16, 1989 at pp. 2-3; John Washa-
kie, Chairman, Shoshone Tribe, Testimony, Hearings, Part 9, May
16, 1989 at p. 14.
137 Id. at pp. 6-7; Gover Testimony, Hearings, Part 9, May 16,
1989 at p. 16; Dewey Schwalenberg, Native American Fish and
Wildlife Society, Testimony, Hearings, Part 9, May 16, 1989 at pp.
18rl9; Letter, Max Dodson, Environmental Protection Agency to
Special Committee on Investigations, May 12, 1989.
138 Baldes at p. 6; Washakie at p. 14.
139 Baldes at pp. 4-10; Washakie at pp. 14-15; David Allison, Su-
perintendent, BIA Wind River Agency, Testimony, Hearings, Part
9, May 16, 1989 at pp. 21-22; Bill Martin, Assistant Commissioner,
Resources Management, Bureau of Reclamation, Testimony, Hear-
ings, Part 9, May 16, 1989 at pp. 28-29.
151
140 Audit Report: "Dam Safety Program, Bureau of Indian Af-
fairs," Office of Inspector General, U.S. Department of the Interior,
Sept. 1989 at p. (i).
141 Id. at pp. 5-6. In addition, the BIA manages the revenues ac-
cruing from American Indian natural resources. The Inspector
General found that BIA could not account for at least $17 million
in these funds, which may never be recovered. Audit Report: "Se-
lected Aspects of Indian Trust Fund Activities— Bureau of Indian
Affairs," Office of Inspector General, U.S. Department of the Inte-
rior, Sept. 1989.
142 Marshall Cutsforth, Chief, Division of Forestry, BIA, Testimo-
ny, Hearings, Part 11, June 8, 1989 at pp. 71-75; Chart on BIA
Annual Timber Harvest vs. Allowable Cut in Marshall Cutsforth
Prepared Statement, June 8, 1989 (Hearings, Part 11, June 8, 1989
at p. 174); D. Fred Matt, President, Intertribal Timber Council, Tes-
timony, Prepared Statement, (Hearings, Part 11, June 8, 1989 at
pp. 115-16; Roy Sampsel, President, R.H.S. Resource Consultants,
Testimony, Hearings, Part 11, June 8, 1989 at p. 77.
143 Ronald L. Trosper, Tribal Economist, Confederated Salish
and Kootenai Tribes, Testimony, Hearings, Part 11, June 8, 1989 at
pp. 60-61; Dr. Gary S. Morishima, Executive Board Member, Inter-
tribal Timber Council, Testimony, Hearings, Part 11, June 8, 1989
at p. 66.
144 Trosper at pp. 58-60.
145 Id.
146 C. Dexter Gill, Forest Manager, Navajo Nation, Testimony,
Hearings, Part 11, June 8, 1989 at p. 55; Trosper at pp. 61-62;
James Spitz, Forestry Consultant, Warm Spring and Yakima
Tribes, Testimony, Hearings, Part 11, June 8, 1989 at p. 69.
147 Id.
148 Indian Self-Determination and Education Assistance Act, P.L.
93-638 (88 Stat. 2203); Trosper at pp. 62-63; Joseph B. DeLaCruz,
President, Quinault Indian Nation, Prepared Statement, Hearings,
Part 11, June 8, 1989 at pp. 242-59; Morishima Prepared Statement
at pp. 144-45.
149 DeLaCruz Prepared Statement at pp. 242-44, 255-56.
150 Letter, Secretary of the Department of the Interior (E. A.
Hitchcock) to President Theodore Roosevelt, Jan. 29, 1907 at p. 5
(59th Cong., 2d Sess., S. Doc. 286, Senate Documents, Vol. 5).
CHAPTER 4
THE INDIAN HEALTH SERVICE
Like so many other federal agencies responsible for
Indian affairs, mismanagement is pervasive at the
Indian Health Service (IHS)— the agency charged with
elevating the health status of Native Americans "to the
highest possible level." While dire health needs of
American Indians often go unmet, IHS senior execu-
tives authorized improper contracts to finance lavish fit-
ness retreats and business meetings at luxurious re-
sorts. Yet soon after 'IHS' newly-created Office of Pro-
gram Integrity and Ethics documented a few of these
abuses, top IHS management stripped its Director of his
powers and the internal reviews ceased. 1
The Status of Indian Health
When Lewis Meriam and his team of investigators re-
leased their report on The Problem of Indian Adminis-
tration sixty-one years ago, they did not mince words
about the health of American Indians: "The health of
the Indians as compared with that of the general popu-
lation is bad." Although the gap between Indian and
non-Indian health has narrowed greatly since 1928, the
same conclusion still holds true today. Three out of
eight Indians die before their 45th birthday, compared
with only one out of eight non-Indians. 2
Indian health is hampered not only by extreme pover-
ty in Indian country, but by the severely limited medi-
cal resources available to reservation Indians. At one
billion dollars per year, the budget of the Indian Health
Service has held constant in real terms for the last
decade. As the Indian population has expanded, and
medical costs have risen faster than the overall cost of
living, fiscal restraint has turned IHS into a "health
care rationing agency," according to its Director, Dr.
Everett R. Rhoades. 3
Last year alone, IHS deferred at least 28,000 patient
care services. 4 Although such delays may not initially
(153)
154
appear too onerous, their long-term effects can be grave:
minor surgery postponed last year often becomes major
surgery next year. On one reservation in Montana, for
instance, services deferred in 1989 included surgical bi-
opsies, obstetrical examinations, mammographies, psy-
chiatric care for suicidal teens, and sexual abuse evalua-
tions. 5
Although most IHS doctors are extremely dedicated,
their ability to provide adequate medical services often
is jeopardized by a debilitating clinical overload. While
the typical metropolitan area has one doctor for every
500 people, IHS physicians are expected, on the average,
to serve 1,400 Indians. IHS' inability to recruit and
retain a significant number of Indian doctors — only 24
of IHS' 700 physicians are Indians— exacerbates this
shortage. About 200 doctors leave IHS every year, and
many of those who remain suffer from "burnout" and
exhaustion. 6
Even more disturbing to many IHS physicians is the
Service's poor management. According to Dr. Bruce
Nicholson, the former clinical director at the Pine Ridge
Indian Reservation, IHS administrators "were spending
money on conferences and air travel when we were des-
perately asking for more nurse midwives and Ob-Gyn
services to combat infant mortality." 7
Similar stories are commonplace within IHS, every-
day reminders of the essential link between administra-
tive management and health care delivery in a time of
growing demand and limited resources. While investiga-
tions by the Special Committee and others have focused
on weaknesses in IHS' Office of Administration and
Management, especially in the areas of procurement, fi-
nance and personnel, the experiences of Dr. Nicholson
and other medical practitioners clearly demonstrate
that problems of administrative management and
health care delivery are closely linked at IHS.
The Inspector General and IHS
The Department of Health and Human Services'
Office of the Inspector General, which conducted 75 in-
vestigations of IHS in the last five years, has exposed
serious management problems at four of the eleven IHS
Area Offices. Assistant Inspector General for Investiga-
tions Larry Morey testified before the Committee that
155
those findings are merely symptomatic of the "fraud
and gross abuse" that pervade IHS. 8
Morey and his agents discovered that the Directors of
various Area Offices, as well as top Headquarters per-
sonnel, repeatedly misused health care funds to finance
extravagant meetings at expensive resorts such as
Mackinac Island, Bar Harbor and Miami Beach. The Di-
rector of IHS initially defended these far-flung resort lo-
cations by noting their proximity to certain smaller res-
ervations. However, after the Special Committee's
public hearing, the IHS Director reversed himself,
saying, "In retrospect, the selections of some locations
for these meetings were inappropriate." 9
Moreover, in the last five years the Inspector Gener-
al's Office of Audit recommended changes that it esti-
mates would have saved the Indian Health Service
more than $37 million, but IHS chose not to take the
necessary corrective actions. Through both audits and
investigations, the Inspector General's office has detect-
ed a "pattern of ignoring rules and regulations with re-
spect to contracts, grants and administrative matters"
and generally failing "to address areas vulnerable to
fraud, waste and abuse." Assistant Inspector General
Morey concluded that "providing the quantity and qual-
ity health care for indigent American Indian citizens is
too vital for IHS to continue tolerating [this] waste of
program funds." 10
The Albuquerque Area Office
The Special Committee's own investigation corrobo-
rated the Inspector General's findings. One of the many
examples of a pattern of administrative abuse involves
IHS' Albuquerque Area Office, the regional office re-
sponsible for meeting Indian health needs in New
Mexico and Colorado.
Over a two-year period, Albuquerque Area Director
Josephine Waconda and her Executive Officer, Art Ray,
signed more than a dozen illegal contracts, or "Memo-
randa of Agreement," rather than subject projects to
the scrutiny of a trained federal procurement officer. 11
By doing so, they facilitated the purchase of almost a
quarter of a million dollars' worth of goods and services
with little or no regard to the price or propriety of the
expenditures. In fact, none of the major expenses in-
156
curred by these Memoranda of Agreement was ever
competitively bid — a violation of the basic principle that
runs through all federal procurement policy and en-
sures American taxpayers that they are getting their
money's worth. 12
Furthermore, the Area Director's predilection for
skirting federal rules and regulations eventually spread
to other members of her staff. On at least two occasions,
the signatures of contractors were apparently forged by
an IHS employee. One of the apparent forgeries was
made in connection with a conference at the Sunrise
Springs Resort near Santa Fe, New Mexico. 13 Although
it was billed as "a week-long didactic and experiential
prototype management seminar," it was in reality a fit-
ness retreat for IHS administrators. 14
The Sunrise Springs event was conceived by IHS
Headquarters staff who asked the Albuquerque Area
Office to hold a Health Promotion/Disease Prevention
(HP/DP) fitness retreat that would serve as a model for
other IHS offices, including Headquarters. The retreat's
stated purpose was "to effectively influence health-re-
lated behavior in the Indian communities [through] a
variety of intervention/prevention strategies, including
personal staff commitment to healthy lifestyles." A vid-
eotape of the retreat, featuring a brief introduction by
the IHS Director, would be distributed widely to inspire
similar activities for IHS administrators across the
nation. 15
The assumption, based on the so-called "dispersion
theory," was that healthier lifestyles would eventually
"trickle down" from the top IHS bureaucrats to the
Indian population. While the retreat was designed, in
part, to serve tribal leaders, only two tribal representa-
tives attended Sunrise Springs. Most of the other three
dozen participants were managers from IHS Headquar-
ters or the Albuquerque Area Office. 16
Although the Headquarters Branch Chief most closely
involved with the planning of Sunrise Springs testified
that it "wasn't a retreat — it was a very intense training
effort," the agenda for Tuesday, March 8, 1988, was typ-
ical:
6:30-7:30 a.m Exercise
8:00 Breakfast
9:00 Consultations
157
10:00 Seminar on "Exercise Without Pain"
11:30 Stretching
12:00 Lunch
1:00 p.m Mini-Seminar on "Getting More Results
with Less Effort: Empowering People
In a Healthy Organizational Climate"
2:30 "Olympics of Fitness" Event— Scaveng-
er Hunt
3:15 Refreshments
3:30 Team Meeting
3:40 Exercise
6:00 Dinner
7:30 Campfire 17
The total budget for this effort was more than
$70,000, including several thousand dollars for "pro ath-
lete" satin warm-up jackets, buttons saying "Catch Me
Doing Something Right," patches, bumperstickers,
visors, decals, trophies and certificates. More than
$13,000 was paid directly to the Sunrise Springs Resort
for rooms, meals and service charges — as well as mas-
sage therapy, acupuncture and "alpha chamber well-
ness services for stress reduction" — services more com-
monplace at Club Med than on the typical Indian reser-
vation. 18
The whole Sunrise Springs affair would have an
almost farcical quality were it not for one additional
fact: the retreat was paid for with funds appropriated
by Congress for the Indian Juvenile Alcohol and Drug
Abuse Prevention Program. Because such a blatantly
improper use of funds would not have survived the
stringent federal procurement procedures, the Area Di-
rector completely circumvented her own contracting
office by signing an illegal Memorandum of Agreement
to finance the retreat. 19 When the Committee first ex-
posed this misuse of juvenile alcoholism prevention
funds, Dr. Rhoades attempted to justify the expenditure
by claiming that massage therapy and acupuncture are
"widely accepted treatment modalities" for alcohol
abuse. He did not explain how giving IHS managers
these treatments would help free Indian teenagers from
their dependence on alcohol. 20
The Bemidji Area Office
Meanwhile, a thousand miles away at the Bemidji
(Minnesota) Area Office, top IHS administrators were
158
engaged in a similar pattern of waste and abuse. In vio-
lation of federal regulations, the Bemidji Area Director,
Alan Allery, and two of his aides regularly approved
their own travel vouchers and then threatened to fire
any employee who reported suspicious travel claims.
Allery was eventually convicted on two felony counts of
filing false claims against the United States, and sen-
tenced to federal prison. Two other IHS employees in
the Bemidji Area were convicted on similar charges. 21
The Committee found that the problems at Bemidji
were not limited to fraudulent travel vouchers. For
years IHS officials funneled money through improper
contracts with a local tribe to pay for various confer-
ences and meetings. By circumventing the normal pro-
curement process, funds that could have been used for
medical care or health education activities were instead
spent on personal items and extravagant retreats. 22
A substantial portion of the $155,000 spent by the Be-
midji Area on Health Promotion/Disease Prevention
(HP/DP) conferences in the last three years paid for
meals of IHS participants (who also received a per diem
and thus were double-dipping), travel for tribal mem-
bers, monogrammed baseball caps, specially-printed T-
shirts, and unnecessary bookkeeping expenses incurred
by channeling money through tribal accounts. Blanket
purchase orders with tribes were also misused for simi-
lar purposes. One order requested federal funds for a
traditional Lakota hoop dancer to perform at local high
schools. The request was initially rejected, but was
quickly resubmitted and approved after the dancer's
title was amended to "Alcohol Consultant." 23
The practice of circumventing federal regulations
reached an extreme in June of 1988 when the Bemidji
Office hosted the quarterly meeting of the IHS Council
of Associate and Area Directors (CAAD). IHS Headquar-
ters at the time was encouraging the Area Offices to
outdo each other in hosting lavish CAAD meetings,
which were attended by all eleven Area Directors, as
well as the IHS Director and his top assistants. Allery
therefore arranged to hold the meeting neither in Be-
midji nor in an accessible and affordable location, such
as Minneapolis, but rather at the luxurious Mission
Point Resort at Mackinac Island, Michigan. To help
meet the costs of staying at the resort, the Director of
IHS approved a special, one-time increase in the allow-
159
able per diem for IHS employees attending the CAAD
meeting. But that was not sufficient to cover the re-
sort's charges, including the rental of double suites with
Jacuzzis, so Allery, acting without Headquarters' ap-
proval, transferred funds from the Bemidji Area's "Hos-
pitals and Clinics" budget to a contract with a local
tribe. The tribe, in turn, kept fifteen percent for its ad-
ministrative expenses and paid the rest to the resort. 24
Several weeks after the Special Committee brought
this matter to light, the IHS Director, Dr. Rhoades, ac-
knowledged that Allery "wrongly used a tribal contract
to cover meeting costs that should have been paid by
the meeting participants. Neither I nor the rest of the
Council of Associate and Area Directors had knowledge
of his actions." Dr. Rhoades added that he was "embar-
rassed and outraged" by Allery 's methods, and assured
the Committee, "when the full costs are known, we will
take whatever steps are appropriate to ensure full cor-
rective action." 25
The Office of Program Integrity and Ethics
Albuquerque and Bemidji are just two examples of
the mismanagement that the Special Committee, as
well as the Inspector General, found throughout IHS.
Ironically, it was neither the Committee nor the Inspec-
tor General that first alerted top IHS managers to these
abuses— it was IHS' own Office of Program Integrity
and Ethics.
After the Indian Health Service was elevated to full
agency status in January of 1988, the Department of
Health and Human Services issued new regulations es-
tablishing, among other things, an Office of Program In-
tegrity and Ethics within IHS' Office of Administration
and Management. The Program Integrity and Ethics
staff was tasked with directing "the investigation and
resolution of allegations of impropriety, mismanage-
ment of resources, abuse of authority, [and] violations of
Standards of Conduct." Six months later, Robert Stakes,
a security officer with eighteen years' experience in the
Department, was named IHS' first Director of Program
Integrity and Ethics. 26
In August of 1988 Stakes conducted an investigation
of the Bemidji Area Office in conjunction with Special
Agent Karen Sweet of the Inspector General's office.
160
Upon discovering evidence of extensive travel voucher
fraud by Alan Allery that later led to his criminal con-
viction, Sweet and Stakes called for Allery's immediate
suspension. Their recommendation to top IHS manage-
ment was apparently ignored, as Allery retained his
post for another three months, almost until the date of
his indictment. During that period Allery repeatedly
took reprisals against employees who he believed had
cooperated with Sweet and Stakes — including one
denial of promotion, several reduced performance rat-
ings, and even a budget cut for one health program run
by an informant. 27
Shortly after the Bemidji review, the Office of Pro-
gram Integrity and Ethics received an allegation from
Albuquerque concerning the use of an illegal contract to
purchase personal items, including expensive warm-up
jackets. Stakes flew to New Mexico and proceeded to in-
vestigate the Sunrise Springs affair. Following the
model of his Bemidji review, Stakes wrote a memoran-
dum outlining his findings on Sunrise Springs, as well
as eleven additional topics that might merit further in-
vestigation, and requested an opportunity to brief the
Director of IHS, but the briefing never took place. 28
In fact, the only relevant discussion Stakes had with
the Director was a brief encounter in the hallway. Dr.
Rhoades asked Stakes to take back a warm-up jacket he
had received from the Sunrise Springs retreat, saying it
was best that he not keep it. The Director never asked
Stakes to discuss his findings about Sunrise Springs or
the other serious problems uncovered at Albuquerque. 29
Although none of Stakes' superiors criticized the qual-
ity of his work and Dr. Rhoades has publicly stated that
the "effectiveness of IHS operations has been increased
by the creation of a Program Integrity and Ethics
Staff," the Office was never allowed to complete its in-
vestigations of Albuquerque or Bemidji. Based on the
obvious management problems he already documented,
in December of 1988, Stakes drew up a schedule that
would take him to the other nine Area Offices in a
twelve-month period. But it soon became apparent that
his two earlier investigations, both of which raised the
specter of criminal prosecution of IHS senior executives,
had diminished Stakes' standing within Headquarters.
"We did [these investigations] in two [Area Offices],"
Stakes testified, "and we were about to do it in the
161
third Area [Office], I guess the approach that we took
provided such startling information that they began to
question whether we should keep doing those or not. [It
came to] a screeching halt." 30
At a January 1989 meeting of the Council of Associ-
ate and Area Directors, several high-level IHS adminis-
trators complained about disruptions caused by the
Office of Program Integrity and Ethics. The loudest
criticisms came from those who had been targets of its
investigations. Stakes, who was allowed to attend part
of that meeting, told the Area Directors "that they had
a serious problem and that IHS had a serious problem
and that I was merely a tool to help pinpoint the prob-
lems and to help with solutions." 31
Apparently, the IHS leadership preferred to keep that
particular tool on the shelf, for the Office of Program
Integrity and Ethics was never again allowed to pursue
a comprehensive investigation of any IHS Area Office.
When Stakes received three serious allegations about
another Area Office, his supervisor gave the task of in-
vestigating them to the Area Director, who was himself
a target of the charges. Stakes testified to the Special
Committee that IHS leaders "have chosen to back off
because it is their key managers that seem to have
problems . . ., rather than some GS-5 clerk." 32
Response to the Special Committee's Hearing
Three months after the Special Committee's public
hearing on Indian health, the Director of IHS acknowl-
edged the agency's problems in a written statement:
"We have gained a new awareness of administrative
weaknesses that could make IHS vulnerable to waste,
abuse, and fraud. ... It is apparent that we have not
adequately adjusted to the added oversight and adminis-
trative requirements of an agency-level organization,
and have not been sufficiently responsive in resolving
administrative problems." In that same statement the
Director reiterated his belief that "the management of
IHS is exemplary," but he also submitted a list of four-
teen distinct "actions to search out and correct our
management problems." 33
Foremost among those fourteen steps was the cre-
ation of a Quality Management Initiative (QMI) to
"strengthen the management and overall accountability
162
of the IHS," an effort Dr. Rhoades named, "the Agen-
cy's number one priority for fiscal year 1990." IHS
hired two independent management consulting firms to
advise the QMI team. In the first draft of their "Strate-
gic Overview," the consultants noted that IHS has "un-
deniable management problems," and is perceived by
others at the Department of Health and Human Serv-
ices (DHHS) as "without question, the most poorly man-
aged of all the agencies in DHHS. " (Emphasis in origi-
nal.) 34
The IHS Quality Management Initiative team's Sep-
tember 1989 report to the Assistant Secretary for
Health summarized the consultants' findings:
The Indian Health Service has serious man-
agement problems. It suffers from real oper-
ational deficiencies — such as the lack of critical
management information and effective direc-
tion. It also suffers from an almost universal
perception that it is managerially inept, that it
believes it need not follow the rules, and that it
denies it has serious management problems.
The management weaknesses that have caused
the agency's problems must be corrected. 35
Conclusion
When Lewis Meriam and his team of investigators re-
leased their report on Indian administration in 1928,
they declared that the "promotion of health and the
relief of the sick are functions of such extreme impor-
tance that they always merit first consideration. . . .
But taken as a whole practically every activity under-
taken by the national government for the promotion of
the health of the Indians is below a reasonable standard
of efficiency." 36
Unfortunately, those words still ring true today. As
Dr. Rhoades himself noted following the Special Com-
mittee's hearing, "The Indian Health Service serves too
great a mission to have it sidetracked by problems in
our management of administrative functions." 37 Yet
despite the pressing health needs of the Indian people
and a shortage of resources to address those needs, IHS
senior executives have repeatedly broken federal laws
and regulations to engage in a pattern of inappropriate
expenditures. Moreover, when evidence of that misman-
163
agement was first exposed by IHS internally, top ad-
ministrators ignored the problem. Sadly, the agency's
managerial failings were not recognized until the spot-
light was placed on the Indian Health Service by the
Special Committee.
ENDNOTES
THE INDIAN HEALTH SERVICE
1 Chart Series Book, Indian Health Service, Public Health Serv-
ice, Department of Health and Human Services, Apr. 1988 at p. 1.
2 Lewis Meriam et al, The Problem of Indian Administration
(Baltimore: The Johns Hopkins Press, 1928) at p. 3; Dr. Everett R.
Rhoades, Director, Indian Health Service, Public Health Service,
Department of Health and Human Services, Prepared Statement,
Hearings, Part 8, May 15, 1989 at pp. 180-83, 189; Dr. Denise
Dougherty, Senior Analyst, Office of Technology Assessment, U.S.
Congress, Testimony, Prepared Statement, Hearings, Part 8, May
15, 1989 at p. 57.
3 Dougherty at pp. 12, 24; Rhoades Testimony, Deposition, May 5,
1989 at p. 81; Rhoades press conference, May 15, 1989. See also
Marybeth Burke, "Budgets Have Forced Medical Care Rationing,"
U.S. Medicine, June 1988 at p. 2.
4 In fact, that figure is probably a gross understatement because
many Indians have been deferred repeatedly and have become dis-
couraged from making further requests for non-emergency care.
Dougherty at pp. 11-12; Dougherty Prepared Statement at p. 73.
5 Memorandum, Deanna P. Walker, Health Systems Specialist, to
Charles D. Plumage, Service Unit Director, Indian Hospital (Fort
Belknap, Harlem, Montana), May 11, 1989, as cited in Georgia
Perez Testimony, Exhibits, Hearings, Part 8, May 15, 1989 at pp.
157-59.
6 There are between 350 and 600 Indian physicians in the United
States, at least 93 percent of whom practice outside of IHS. Inter-
view Memorandum, Executive Director of the Association of Amer-
ican Indian Physicians, Aug. 24, 1989; "Budgets Have Forced Medi-
cal Care Rationing" at p. 26; Dougherty Prepared Statement at pp.
69, 73.
7 Dr. Bruce Nicholson Testimony, Prepared Statement, Hearings,
Part 8, May 15, 1989 at pp. 91-92.
8 The four Area Offices are located in Aberdeen, South Dakota,
Albuquerque, New Mexico, Bemidji, Minnesota, and Oklahoma
City, Oklahoma. Larry D. Morey, Assistant Inspector General for
Investigations, Office of the Inspector General, Department of
Health and Human Services, Testimony, Hearings, Part 8, May 15,
1989 at pp. 31-36; Briefing Paper, Inspector Linda Little, Criminal
Investigations Division, Office of the Inspector General, Depart-
ment of Health and Human Services, June 2, 1989 at p. 2.
9 Morey at p. 32; Rhoades Deposition at pp. 68-70; Rhoades Pre-
pared Statement of Aug. 22, 1989, Hearings, Part 8, May 15, 1989
at p. 166.
10 The Director of IHS, on the other hand, testified that the In-
spector General is "inspecting us all the time. . . . The standard
(164)
165
cliche in Indian communities some years ago was that the way you
could tell an Indian family was a Navajo woman and her child in a
hogan with an anthropologist and a tape recorder. That's now been
replaced by the Inspector General. I mean, we are investigated con-
tinually. It interferes with our work, notwithstanding the impor-
tance of it, notwithstanding the value of it." Rhoades Deposition at
p. 78. See also, Briefing Paper, Inspector Linda Little at pp. 2-3;
Morey at p. 33.
1 1 After obtaining a legal opinion from the DHHS Office of the
General Counsel, IHS distributed Guidelines for Health Promo-
tion/Disease Prevention Activities which stated: "It is never appro-
priate to use a Memorandum of Agreement for the purchase of
goods or services from non-federal sources (unless specifically au-
thorized in a statute)." (Emphasis in original.) Guidelines, July 26,
1989 at p. 6.
12 Even if the Memoranda of Agreement had been legal instru-
ments, IHS Area Directors lack the authority to sign them. Such
authority is reserved to highly trained and certified contracting of-
ficers, but the Principal Contract, Grants and Procurement Man-
agement Officer in Albuquerque was not even aware of the exist-
ence of the Memoranda of Agreement signed by Waconda and Ray.
Hearings, Part 8, May 15, 1989 at p. 34. See also, Albuquerque
Memoranda of Agreement file; Robert W. Stakes, Director, Office
of Program Integrity and Ethics, Office of Administration and
Management, Indian Health Service, Testimony, Deposition, May
6, 1989 at pp. 97-98.
13 This matter is still under investigation by the Inspector Gen-
eral. Memorandum on Report of Investigation of Possible Fiscal Ex-
ception at the Albuquerque Area Office, Director, Division of Fiscal
Services, HRSA to Associate Director, Office of Administration and
Management, Indian Health Service, Mar. 14, 1989 at pp. 9-14.
14 Memorandum of Agreement between United States Public
Health Service and Health Net New Mexico, Mar. 3, 1988 at p. 1.
15 Rhoades Deposition at pp. 47-48; Memorandum of Agreement,
Mar. 3, 1988 at p. 1; Russell D. "Bud" Mason, Chief, Alcohol/Sub-
stance Abuse Programs Branch, Office of Health Programs, Indian
Health Service, Testimony, Deposition, May 3, 1989 at pp. 17-24;
W. Craig Vanderwagen, Director, Division of Clinical and Preven-
tive Services, Office of Health Programs, Indian Health Service,
Testimony, Deposition, May 5, 1989 at p. 13; Stakes Deposition,
May 6 at pp. 74-75; "Wellness ... A Plan for Life," Indian Health
Service Fitness Retreat, Color Dub Videotape, Summer 1988, 24 Vfe
minutes.
16 Rhoades Prepared Statement of Aug 22, Exhibit 4 at pp. 221-
27; Mason Deposition at pp. 17-23.
17 Id. at p. 35; "Fitness Retreat Schedule," Sunrise Springs:
Health Care Programs and The Fitness Connection at pp. 1-2.
18 "The alpha chamber is a sensory deprivation apparatus which
facilitates meditation." Rhoades Prepared Statement of Aug. 22,
Exhibit 4 at p. 227. See also, Sunrise Springs Fitness Retreat
budget documents.
19 The Memorandum of Agreement authorizing this retreat was
further marred by a blatant conflict of interest. IHS Area Director
Waconda signed on behalf of the federal agency, and Bruce Leon-
166
ard, an IHS employee temporarily detailed to Health Net New
Mexico, signed as the contractor. Memorandum of Agreement,
Mar. 3, 1988 at p. 3. See also, Vanderwagen Deposition at pp. 10-11;
note 12 supra.
20 Rhoades press conference, May 15, 1989; Bill McAllister, "Hill
Panel Halts Hearing On Indian Health Agency," Washington Post,
May 16, 1989 at p. A4; Diane Duston, "Panel Says Indian Health
Service Tried to Stymie Probe," Associated Press wire, May 15,
1989; Anne Q. Hoy, "Indian unit funding for retreat probed,' The
Arizona Republic, May 21, 1989 at pp. Al, A12.
21 During Allery's four-year tenure as Area Director, the Bemidji
Area Office's travel budget more than doubled, from $442,650 to
$924,028. Management Implication Report, Special Agent Karen
Sweet to Assistant Inspector General for Investigations Larry
Morey, Feb. 14, 1989 at p. 2; Morey at pp. 31-32; Interview, Linda
Little, Office of Investigations, Office of the Inspector General, De-
partment of Health and Human Services, Sept. 26, 1989.
22 Management Implication Report; Morey at pp. 31-33.
23 Id. at pp. 32-33; Management Implication Report at p. 3;
Travel orders for Nov. 15-18, 1988, Bemidji Area Office.
24 Memorandum on Report of Investigation of Possible Violation
of Government Travel Regulations, Director, Division of Fiscal
Services, HRSA to Director, Indian Health Service, Sept. 21, 1989,
Exhibits G, J and K; Management Implication Report at p. 3.
25 Rhoades Prepared Statement of Aug. 22 at p. 166.
26 Vol. 54, no. 17, Federal Register 4086, Friday, Jan. 27, 1989;
Stakes Testimony, Deposition, May 3, 1989 at pp. 1-3.
27 Stakes Deposition, May 6 at pp. 28-33, 47; Management Impli-
cation Report at pp. 3-4; Memorandum, Robert W. Stakes, Direc-
tor, Office of Program Integrity and Ethics to Robert Singyke,
Deputy Director, IHS, re: Bemidji Administrative Review, Oct. 6,
1988 at pp. 1-10.
28 Stakes Deposition, May 6 at pp. 78-79; Memorandum, Robert
W. Stakes, Director, Office of Program Integrity and Ethics, to
Howard Roach, Associate Director, Office of Administration and
Management, IHS, re: Albuquerque Area Administrative Review,
Nov. 4, 1988 at pp. 1-15.
29 Rhoades Deposition at pp. 43-45. Stakes Deposition, May 6 at
p. 99.
30 Rhoades Prepared Statement of May 15 at p. 187; Stakes Depo-
sition, May 6 at pp. 106-09; Stakes Deposition, May 3 at pp. 20-21.
31 Stakes Deposition, May 6 at p. 114.
32 Id. at pp. 31-33, 37-39, 99-106, 110-11.
33 Rhoades Prepared Statement of Aug. 22 at pp. 163-66.
34 The draft version of the "Summary of Interviews" cited in the
text was transmitted by facsimile from Scanlon & Hastings to IHS
Headquarters on August 16, 1989. When the bound version of the
firms' Strategic Overview was printed thirteen days later, the quote
had been altered to read: ". . . without question, IHS must
strengthen its management if it is to continue to deliver quality
health services in a period of growing demand and constrained re-
sources." (Emphasis in original.) Indian Health Service Quality
Management Initiative, Aug. 29, 1989 at p. 31. For the original
draft, see Indian Health Service Quality Management Initiative:
167
Strategic Overview— Draft, Logistics Management Institute and
Scanlon & Hastings at p. 25. See also, A Report to the Assistant
Secretary for Health on "A Plan for Quality Management in the
Indian Health Service," Sept. 18, 1989 at p. 1; Letter, Rhoades to
Wilford J. Forbush, Deputy Assistant Secretary for Health Oper-
ations, Department of Health and Human Services, July 1989.
35 Again, the draft version submitted to IHS by the two manage-
ment consulting firms was weakened. The original version read as
follows, with emphasis added to mark the words eventually deleted:
The Indian Health Service has serious management
problems that affect its provision of health care. It suffers
from real operational deficiencies— such as the lack of crit-
ical management information and effective management
direction. It also suffers from an almost universal percep-
tion that it is managerially inept, perhaps even corrupt,
and that it arrogantly believes it need not follow the rules.
The management weaknesses that have caused the agen-
cy's problems must be corrected. Underlying those prob-
lems is an agency-wide lack of management leadership.
Facsimile transmittal, Logistics Management Institute to IHS
Headquarters, Sept. 14, 1989. For the weakened version, see A
Report to the Assistant Secretary for Health on "A Plan for Qual-
ity Management in the Indian Health Service," Sept. 18, 1989 at p.
1.
36 Meriam et al at pp. 121, 189.
37 Memorandum, Dr. Rhoades, Director, IHS to Larry Morey, As-
sistant Inspector General for Investigations, June 28, 1989 at p. 1.
CHAPTER 5
INDIAN HOUSING
According to the Bureau of Indian Affairs, Indian
country currently suffers from a 62,000-unit housing
shortage. Moreover, many Indian families are forced to
live in houses that are substandard, and in some cases
virtually uninhabitable. The Census Bureau has report-
ed that 16 percent of all reservation homes lack electric
lighting and 21 percent have no indoor toilets. 1
At a Special Committee hearing Senator Daschle re-
called one night he spent with an Indian family:
In South Dakota the wind chill in the winter-
time gets to be 75 below zero .... I stayed in
[a house on the Pine Ridge Reservation], and
there was a four-inch gap between the wall and
the ceiling at the top. The braces underneath
the floor, instead of being 18 inches were 36
inches apart, so the floor swayed.
There was one electrical unit in the whole
house that worked, and they had extension
cords going from every room to that one wall
unit. And there was this great big collection of
extension plugs that went into one unit so they
could get all the cords in there ....
They showed me where the heater units on
the side were installed, but then they took me
underneath the floor, and all the cords for
those heater units were just dangling ....
They weren't hooked up to anything. They
were just there for looks. 2
Senator Daschle's story is far from unique on Ameri-
can Indian reservations today. To combat similar prob-
lems half a century ago, Congress passed the United
States Housing Act of 1937, authorizing loans to local
housing authorities for public or low rent housing. The
Interior Solicitor declared tribes eligible for this pro-
gram, but it was not until 1961— more than two decades
(169)
170
later — that the federal Department of Housing and
Urban Development (HUD) permitted tribes to partici-
pate. And it was not until 1976 that HUD published its
first guidelines on Indian housing. Under those regula-
tions, HUD allocates funds to 180 tribally-run Indian
housing authorities (IHA's), who then have primary re-
sponsibility for designing, contracting, developing and
managing the housing units. HUD develops policies and
regulations, oversees six regional Indian field offices,
and gives technical assistance to the IHA's, as neces-
sary, all with the goal of providing safe, decent and san-
itary Indian housing at the lowest possible cost. 3
In recent years accomplishing this goal has become
more difficult, as annual funding for Indian housing has
decreased to less than three percent of the total esti-
mated need. While BIA estimates a 62,000-unit housing
shortage, HUD's fiscal year 1989 allocation for new res-
ervation housing covered only 1,243 units. With such an
extreme shortage of resources to address Indian housing
needs, efficient administration becomes particularly
critical. 4
Confusion in the Indian Housing Program
Unfortunately, Indian housing projects have become
case studies in bureaucratic confusion and unaccount-
able government. The federal functions are divided be-
tween three agencies in three different Cabinet depart-
ments— BIA for roads, the Indian Health Service for
water and sanitation facilities, and HUD for the houses
themselves. In addition, HUD shares its responsibilities
with Indian housing authorities which have authority
to enter into contracts and control the day-to-day activi-
ties involved with constructing new homes. 5
The federal government's relationship with tribal au-
thorities frequently makes for an odd partnership.
Sometimes the relationships between HUD and the
tribal authorities are cozy, as when the Department ap-
proved one IHA's purchase of a computer, a photocopi-
er, and a truck with power windows and locks, cassette
player and mag wheels, as well as the remodelling of
the IHA's office— all as part of HUD's financing of a
housing project. Other times, their relationships are
strained, as when HUD insisted, over the strongly
stated objections of the IHA, on paying in full an archi-
171
tect who, according to the IHA, had been fired for
breach of contract. 6
But most often, confusion and duplication between
the federal and tribal bureaucracies simply lead to
wasted time and money. In fact, the Special Committee
has found the greatest failures in the Indian housing
program occur in areas where responsibility is divided
between federal and tribal authorities— administering
Indian preference in contracting, ensuring adequate ar-
chitectural services, providing basic utilities to newly
constructed units, and performing on-site inspections.
FRAUD IN INDIAN PREFERENCE CONTRACTING
Like the other federal agencies involved in Indian
preference contracting, HUD has been vulnerable to
fraud and abuse, making it a haven for phony Indian
companies that successfully bid contracts away from le-
gitimate Indian firms. While the market for Indian
preference housing contracts has been captured by
firms that are Indian in name only, HUD has never dis-
qualified a single front company. As a result, much of
the $125 million that HUD makes available each year
for Indian contractors has actually been awarded to
front companies posing as independently controlled,
Indian-owned firms. 7
Although HUD's own internal guidelines give it the
authority to disqualify contractors that abuse the
Indian preference contracting program, IHA's actually
award the contracts, applying Indian preference at their
own discretion. HUD therefore expects the IHA's— who
lack the federal department's subpoena power and in-
vestigative authority — to ensure the selection of trust-
worthy, reputable firms. When questioned by the Spe-
cial Committee, the Director of HUD's Office of Indian
Housing explained, "We have relied on the Indian
Housing Authorities to implement Indian preference,
and we have not followed up as carefully as we should
have." 8
Given that a substantial portion of HUD's construc-
tion contracts are awarded to firms that dishonestly
manipulate the government's program for Indian eco-
nomic development, the need for stringent oversight is
clear. When the contractors are not trustworthy, the
contracting agencies — whether federal or tribal — must
be particularly vigilant, not only in Indian preference,
172
but across-the-board. Yet the confusion that dominates
the HUD-IHA relationship is hardly conducive to ade-
quate oversight.
FAULTY ARCHITECTURAL SERVICES
Among the other responsibilities shared by HUD and
tribal authorities is the selection of capable contractors
for housing projects. HUD's guidelines give IHA's the
authority to select and enter into contracts with archi-
tects and engineers, but require HUD to ultimately ap-
prove the hiring of all architects and engineers, as well
as all plans submitted by them. As in the case of Indian
preference enforcement, this division of responsibility
has left no one party accountable, and adequate quality
control in the hiring of architects and engineers is vir-
tually non-existent. 9
The Office of Indian Housing is largely incapable of
reviewing plans for the projects they fund, as only one
of its six regional offices contains any professional ar-
chitects or engineers. HUD therefore relies on IHA's to
judge architects' qualifications, yet it has set no stand-
ards for the IHA's to perform this essential task. In nu-
merous projects surveyed by the Special Committee, ar-
chitects provided defective plans or services, and the
IHA was forced to hire additional contractors to correct
defects discovered during the design or construction. 10
On one project at the Wind River Reservation in Wy-
oming, for example, the architect drafted defective de-
signs — including a faulty drainage system that caused
serious flooding — resulting in well over $100,000 in addi-
tional costs. To cover the fees for a new architect,
money was taken from the paving budget and the
project therefore has gravel roads. While the project
was still in progress, an employee of the fired architect
became a member of the IHA's executive board. x J
After an architect originally selected by the IHA and
HUD went bankrupt during the early stages of a project
on the Navajo Reservation, two additional architects
were hired and paid to finish 60 modular homes. For a
project at Cheyenne River, in South Dakota, HUD ap-
proved architectural plans that contained "deficiencies"
which, as noted by the HUD inspector for that develop-
ment, caused "daily problems" in the construction
work. 12
173
LACK OF UTILITIES AT HOUSING SITES
Even the task of guaranteeing that constructed homes
will have access to basic utilities such as water and elec-
tricity often gets bungled by bureaucratic confusion.
HUD is required to obtain written assurances that utili-
ties will be accessible prior to occupancy, but IHA's ac-
tually monitor the contractors' efforts to make utilities
available to all units. Also, the Indian Health Service
has the responsibility for overseeing the design and in-
stallation of proper sewer facilities on HUD Indian
housing projects, and BIA reviews and approves legal
descriptions of proposed housing sites, as well as any
agreements which allow parties providing utilities the
right to traverse reservation lands. 13
In a number of projects reviewed by the Special Com-
mittee, the confusion surrounding these tasks has led to
added and unnecessary costs. But worse, houses were
sometimes built and occupied without electricity or
water service.
For instance, on a 26-unit project on the Santa Ynez
Reservation in California, HUD waited over eight
months for the BIA to approve proposed utility plans
and suggested easements. When BIA failed to respond,
HUD went ahead with construction due to time con-
straints. Not suprisingly, electricity to the houses was
ultimately delayed by easement problems. HUD re-
sponded to the delay by claiming that the IHA and con-
tractor were responsible for coordinating access to elec-
tric power. On that same project, construction was more
than 90 percent completed before the Indian Health
Service complained to HUD that the water and sewer
system installed by the contractor was unacceptable be-
cause it violated the Uniform Plumbing Code. 14
In April of 1986 the architect's inspection reports to
HUD noted that water service was not available to
seven of thirteen units being built on the Ute Mountain
Reservation in Colorado. Three months later, when the
project was about to be completed, two units still lacked
water service, one of which was eventually occupied
after a portable toilet was installed. 15
INADEQUATE ON-SITE INSPECTION
IHA's employ inspectors to oversee the construction
of housing projects, but HUD guidelines require federal
174
inspectors to provide periodic monitoring, too. However,
HUD's on-site reviews of Indian housing projects are
limited and inconsistent, as the federal office usually as-
sumes that IHA's are providing the necessary day-to-
day inspections. Because HUD has not established mini-
mum standards for IHA inspectors, housing inspection
is sometimes left to "inspectors" who lack minimal
qualifications or expertise. 16
For example, at the Navajo Reservation, a 150-unit
development was reviewed more than 30 times by in-
spectors for both HUD and the Navajo IHA. At one
point the HUD reviewer noted that construction was 35
percent complete. The following week, the IHA inspec-
tor declared the project only 25 percent complete and
one month later, the same HUD reviewer stated it was
30 percent complete. Given such confusion, it is not sur-
prising that less than seven months after the units were
officially deemed ready for occupancy, the "completed"
development had "severely deteriorated" streets, gut-
ters and walkways, and leaky units which were built
"out of place." 17
The Costs of Confusion: Delays and Overruns
Faulty architectural plans, poor site selection, and in-
adequate on-site inspections all contribute to lengthy
delays in Indian housing projects. Often the length of
time required to complete a project has less to do with
its size than with the extent of bureaucratic mishap.
The second project at Navajo mentioned above was
more than ten years in the works. A housing project
with only 22 units at the Lake Traverse Reservation in
South Dakota faced "serious delays" due to, among
other things, the hiring of a deficient contractor, and
was not completed until 1986 — seven years after HUD
initially reserved funds for the project. 18
The Director of HUD's program traces extended
delays to the confusing, duplicative bureaucracies that
administer Indian housing: "When a project does go
wrong, for whatever reason, we seem to have a difficult
time getting it back under control. . . . We get involved
at the HUD level. The housing authority still has the
main responsibility, but frequently HUD and the hous-
ing authority may have a disagreement on how to [pro-
175
ceed]. Sometimes [HUD] may even be an obstacle in the
housing authority's completion of this project." 19
These same delays typically lead to cost overruns as
well. HUD approves these overruns by signing change
orders that amend existing contracts. Such requests for
additional funds are sometimes necessary, but should be
rare. 20
All too often, however, change orders result from
problems that could have been avoided if HUD or the
IHA had provided proper oversight. Change orders are
often required to remedy simple problems with architec-
tural plans. On one project at the Manchester Ran-
cheria in California, for example, change orders were
needed to correct engineering errors and relocate
meters that were improperly installed due to unclear
plans. A 47-unit project at Cheyenne River in South
Dakota underwent 74 separate changes, several of them
for services that could have been averted if the archi-
tect's plans were reviewed properly before being imple-
mented. One of those change orders, however, was
worse than unnecessary, as HUD, in an act of pure neg-
ligence, approved funds for corrections already made
and paid for with a previous change order. Extra costs
in a project at Turtle Mountain in North Dakota also
forced HUD to drop the construction of eight units con-
templated by the original contract. 21
Conclusion
Interestingly, the critical functions for which HUD
and IHA's share responsibility are the precise areas
where the Special Committee found checks and bal-
ances to be the most deficient. In hiring competent ar-
chitects, guaranteeing availability of basic utilities to
new houses, conducting proper inspections during con-
struction, and even enforcing Indian preference guide-
lines, neither HUD nor the IHA's assume full responsi-
bility. Because of confusion as to whether federal or
tribal authorities are responsible, neither party can be
held entirely accountable for the failures we have un-
covered.
In an environment where accountability is so elusive,
each party blames the other for their failures. IHA's
often fault HUD for pursuing a middle-of-the-road
policy, failing to either provide them with adequate sup-
176
port or give them full autonomy. They fault HUD for
continuing to use internal guidelines rather than
agency regulations which are subject to public scrutiny,
and believe that HUD's paternalistic attitude hinders
the efficient construction of new housing. 22
The current Director of HUD's Office of Indian Hous-
ing agrees, in part, but feels that IHA's should not
escape sharing the blame: "There is quite a bit of ambi-
guity on who is responsible to do various items. We
have tried to put into the hands of the housing authori-
ties as much responsibility and authority as we can.
Where we have been clear about what their responsibil-
ity and authority is, IHA's have had no problem. . . .
In certain areas where we seem to go back and forth on
who really must do something, ... we have prob-
lems." 23
As HUD and the IHA's "go back and forth," unneces-
sary costs are added to Indian housing construction
projects. Scarce funds that could be used to build much-
needed additional units are instead wasted. The only
victims of this system — the American Indian men,
women and children who are forced to live in substand-
ard housing, or even go homeless — have no one who
they can hold to account.
ENDNOTES
INDIAN HOUSING
1 Consolidated Housing Inventory, Fiscal Year 1988, Form 5-
6406, Bureau of Indian Affairs, Department of the Interior; We, the
First Americans, Bureau of the Census, U.S. Department of Com-
merce, 1989 at pp. 13-14.
2 Senator Thomas A. Daschle, Hearings, Part 11, June 8, 1989 at
pp. 48-49.
3 42 U.S.C. §1437 et seq.\ Felix Cohen et al, Felix S. Cohen's
Handbook of Federal Indian Law, 1982 ed. (Charlottesville, VA:
Michie, 1982) at pp. 706-12; Dominic Nessi, Director, Office of
Indian Housing, U.S. Department of Housing and Urban Develop-
ment (HUD), Testimony, Prepared Statement, Hearings, Part 3,
Feb. 27, 1989 at p. 671; U.S. Congress, Senate, Select Committee on
Indian Affairs, Amending the United States Housing Act of 1937 To
Establish A Separate Program To Provide Housing Assistance For
Indians and Alaska Natives, 100th Cong., 2nd sess., May 13, 1988,
S. Rep. No. 100-344 at pp. 1-3.
4 Consolidated Housing Inventory; Nessi Testimony, Hearings,
Part 11, June 8, 1989 at p. 44.
5 "Interdepartmental Agreement On Indian Housing," 24 CFR
Part 905, Subpart B, Appendix 1; 24 CFR 905.202; "Development
Process Overview," HUD, undated.
6 Letter, Executive Director, Housing Authority of the Kiowa
Tribe of Indians, to Director, Indian Programs Division, HUD, Aug.
22, 1988; "Area Office Review Form," HUD, OK 98-6, Sept. 15,
1988; Letter, John Dibella, Director, Housing Development Divi-
sion, Office of Indian Programs, HUD, to Earon T. Dahl, Executive
Director, Ute Mountain Ute Housing Authority, Dec. 12, 1989;
Letter, Dahl to Jack Windsor, Chief, Technical Services Branch,
HUD, Dec. 17, 1985; Letter, Dibella to Dahl, Jan. 3, 1986; Letter,
Dahl to Dibella, Jan. 13, 1986.
7 See Part Three, Chapter 1 supra for findings of the Special
Committee regarding Indian preference in contracting. In 1988 ap-
proximately $130 million was spent by HUD on the construction of
new Indian housing units, of which about $125 million was avail-
able to be bid under Indian preference. However, in that same year
HUD's budget authority for its Indian housing program, which in-
cludes rehabilitation of existing units, was over $200 million. Nessi,
Interview, Oct. 17, 1989; Federal Funding of Indian Programs,
Office of Management and Budget, June 13, 1989.
8 24 CFR 905.204; Nessi, Feb. 27 at p. 277.
9 "Program Participants and Departmental Staff, Interim Indian
Housing," Handbook 7440.1 (HUD Indian Housing Handbook) at
sections 3-2(a), 7-2(a), 7-2(b). See also 24 CFR 905.211(b).
(177)
178
10 HUD's Indian program is administered by six Offices of Indian
Programs located in Chicago, Oklahoma City, Phoenix, Denver, Se-
attle, and Anchorage. HUD's main office in Washington, D.C. in-
cludes a staff of 12 who deal exclusively with Indian programs.
Nessi, June 8 at pp. 37, 39, 42; Leon Jacobs, Director, Office of
Indian Programs (Chicago), HUD, Interview, Sept. 19, 1989.
1 x Letter, John V. Myers, Director, Office of Indian Housing,
HUD, to Roger W. Kipp, Thomas Hodne/Roger Kipp Architects/
Planners, June 11, 1986; Letter, John Dibella, Director, Housing
Development Division, Office of Indian Programs, HUD, to Lucille
McAdams, Executive Director, Wind River Housing Authority, Jan.
17, 1986; Change Orders G-l to G-9, WY 1-15; Office Memoran-
dum, Arapahoe Housing Authority Members to Arapahoe Business
Council, Apr. 12, 1983.
1 2 Letter, Bruce Knott, Production Manager, HUD, to John Cha-
pela, Executive Director, Navajo Housing Authority, Mar. 9, 1987;
Letter, Chapela to Knott, Mar. 17, 1987; "HUD Representative's
Trip Report," SD 5-17, June 12, 1987 and Nov. 24, 1987.
13 HUD inspectors must further be satisfied that, on the final in-
spection of a project, "all facilities and utilities essential to occu-
pancy are provided." HUD Indian Housing Handbook, sections 3-
3(a), 3-3(b), 3-3(0, 3-3(g), 3-3(h), 7-14(b)(2); 24 CFR 905.216-905.217.
14 Response, HUD to Special Committee chart, undated; Letter,
Gene Bigelow to Greg Mize, Vice President, The Antique Manner,
Apr. 4, 1988; "HUD Representative's Trip Report," CA 80-24, 26,
45A, Oct. 21, 1988; Letter, Terry L. Whitington, District Engineer,
IHS, to Gene Bigelow, Development Officer, All Mission Indian
Housing Authority, Mar. 17, 1988; "Low Rent Project Construction
Report/' CA 80-26, HUD, Feb. 29, 1988.
15 "HUD Representative's Trip Report," CO 47-5, July 28, 1988;
Reports, Brookie Architecture and Planning, Apr. 29-30, 1986.
16 HUD inspectors must be satisfied that, on the final inspection
of a project, the work has been installed in compliance with the
contract requirements, [and] that all facilities and utilities essen-
tial to occupancy are provided." HUD inspectors are also charged
with carefully examining the "adequacy and quality" of the IHA
project inspection staff. HUD Indian Housing Handbook sections 7-
2, 7-10(a), 7-10(d), 7-14(b)(2). See also 24 CFR 905.221; Nessi, June 8
at pp. 39-40.
17 "HUD Representative's Trip Report," AZ 12-57, Oct. 23, 1985
and Dec. 4, 1985; "Low Rent Public Housing Construction Report,"
AZ 12-57, Navajo Housing Authority, Oct. 31, 1985; Letter, Bruce
A. Knott, Production Manager, to John A. Chapela, Executive Di-
rector, Navajo Housing Authority, Nov. 4, 1986; "OIP Representa-
tive Trip Report," AZ 12-57, HUD, July 22, 1987; Letter, Navajo
Housing Authority to Ralphael Mechem, Director, Region IX,
Office of Indian Programs, HUD, Oct. 2, 1987; Letter, Fred Thomp-
son, Jr., Executive Director, Navajo Housing Authority, to Bruce
Knott, Production Manager, HUD, undated.
18 Letter, Robert Vasquez, Assistant Regional Administrator,
HUD, to Richard Johnson, Executive Director, Navajo Housing Au-
thority, Aug. 3, 1977; "Notice of Date of Full Availability," AZ 12-
57, HUD, approved Sept. 25, 1987; Letter, William Hallett, Direc-
tor, Office of Indian Programs, HUD to Daryl E. Hormann, Execu-
179
tive Director, Sisseton-Wahpeton Housing Authority, May 8, 1979;
Letter, John Dibella to Ron Jones, Executive Director, Sisseton-
Wahpeton Housing Authority, July 7, 1988.
19 Nessi, June 8 at p. 41.
20 In fact, any delays in housing projects, at a minimum, lead to
extra costs due to inflation. Although the situation is currently im-
proved, a 1984 audit by the HUD Office of the Inspector General
estimated that funds that could provide over 600 Indian housing
units were being lost annually by HUD due to project delays.
"Report On Audit Of The Development And Management Of
Indian Housing," Office of the Inspector General, HUD, 86-TS-
101-0018, June 19, 1986 at pp. 1-2; HUD Indian Housing Handbook
at section 7-11.
21 Letter, Darlene Tooley, Executive Director, Northern Circle
Indian Housing Authority, to Randy Willard, IHS, May 25, 1988;
Letter and enclosure, Darlene Tooley to Frank Schierenbeck, Office
of Indian Programs, HUD, June 9, 1988: "HUD Representative's
Trip Report," SD 5-17, Nov. 24, 1987; Change Order G-8, SD 5-17;
Letter, Glen Barber, President, R & S Construction Company, to
Terry Pearman, Cheyenne River Housing Authority, Aug. 8, 1987;
Change Order G-ll, SD 5-17; Letter, Jim Bier, R & S Construction
Company to Terry Pearman, June 18, 1987; Letter, John Dibella,
Director, Housing Development Division, Office of Indian Pro-
grams, HUD, to Albert Wilkie, Executive Director, Turtle Moun-
tain Housing Authority, Sept. 22, 1986; Letter, Daniel Killeen, Ar-
chambault & Company, to Albert Wilkie, Jan. 31, 1986; Letter,
Charles E. Archambault, Archambault & Company, to Albert
Wilkie, Aug. 6, 1986.
22 Resolution, New Mexico Indian Housing Authorities Associa-
tion, Resolution #3, #10, Feb. 21, 1989; Nessi, June 8 at p. 43.
28 Id. at p. 42.
CHAPTER 6
CORRUPTION AMONG TRIBAL GOVERNMENTAL
OFFICIALS
American Indian tribal governments occupy a unique
place in the federal system. Compared to state and local
governments, their present form is relatively recent.
However, the existence of Indian tribal governance pre-
dates by centuries the Constitution itself. Yet it was
only within the last two decades that these govern-
ments have acquired the power and recognition ap-
proaching that held in 1789. As with any other recently
emerging government or indeed country, newly-found
power affords opportunity for its abuse. At the same
time, checks and balances to thwart individual corrupt
officials have not had the same opportunity to develop.
This pattern of new governments— and countries— suf-
fering endemic corruption is nearly universal and
should not be viewed as in any sense peculiar to the
Native American experience. Yet that universal histori-
cal fact can in no way mitigate the necessary attack
against corruption. In fact, it only increases its urgency.
While Indian citizens often live in poverty, bereft of the
economic opportunities available to other Americans,
they have fallen prey to the actions of certain corrupt
officials. American Indians cannot afford corruption.
Tribal governments, as well as the federal system in
which they operate, must not spare any effort or ex-
pense to root out corruption, no matter where it is
found. 1
Peter MacDonald and The Navajo Nation
The largest American Indian tribe in the United
States is the Navajo Nation. The Navajo Nation com-
prises some 200,000 individuals, over a fifth of all reser-
vation Indians in the country, while its land mass is
larger than West Virginia and eight other states. The
annual budget of the Navajos' tribal government and its
natural resource base dwarf those of other tribes. The
(181)
182
importance of the Navajo Nation among American Indi-
ans makes even more tragic the corruption found by the
Committee. 2
The leading Navajo politician of the modern era is
Peter MacDonald. Born Hashkesilth Begay in 1928 on
the Navajo Reservation, MacDonald graduated from the
University of Oklahoma and became an engineer with
Hughes Aircraft in 1957. Returning to the reservation
in 1963 to work for the tribe, in 1965 he headed the
Navajo Office of Economic Opportunity. In 1970 Peter
MacDonald was elected Tribal Chairman, the Chief Ex-
ecutive Officer and highest official of the Navajo gov-
ernment. He served three four-year terms until 1983,
throughout the era when tribal governments were
transformed into modern, full-fledged governments sup-
ported by extensive federal funds. While MacDonald
lost a reelection bid in 1982, he helped usher in the new
era of tribal government to the Navajo people. 3
THE 1986 CAMPAIGN
In early 1986 MacDonald faced the prospect of the
Navajo Chairman's election in November. He turned to
his close friend Byron T. "Bud" Brown for help. A non-
Navajo, Brown had directed the Navajo Agricultural
Products Industry Commission during MacDonald's last
term. Since the 1982 election MacDonald and Brown, an
intermittent entrepreneur and two-time congressional
candidate, made numerous attempts to profit from busi-
ness deals, all to no avail. 4
MacDonald's sights were set high: the Governorship
of Arizona, or perhaps Congress. But Brown advised and
MacDonald agreed that MacDonald stood a greater
chance for reelection as the Navajo Tribal Chairman
once again. 5
To help with the reelection effort, MacDonald and
Brown established the Peter MacDonald Foundation, os-
tensibly charitable in purpose, to provide MacDonald
with a renewed political profile to the non-Navajo
world — and money. Yet, like all of MacDonald and
Brown's previous business deals, the foundation failed
to make a profit. MacDonald had to turn to others for
the funds. 6
There was a cadre of non-Navajo contractors and
businessmen active under MacDonald's previous admin-
istration and largely shut out under then-Navajo Chair-
183
man Peterson Zah. According to Navajo tribal law, it
was illegal to accept campaign contributions from non-
Navajos. Nonetheless, MacDonald sought them out for
funds, gifts and services-— with the hope for future busi-
ness clearly in sight. 7
MacDonald's quest for cash, whether for the cam-
paign or his own personal lifestyle, was so great that he
borrowed $70,000 on a short-term, unsecured note from
the United New Mexico Bank in Gallup, New Mexico.
On his loan application MacDonald falsely stated that
the funds were for his son's purchase of a home in Cali-
fornia. But he guaranteed the bank that he could repay
the loan once he became tribal Chairman again, a rep-
resentation the bank readily accepted. 8
Of course, the bank did not know how true their
belief really was. For not only were MacDonald's sights
set high; Brown, too, saw his fortune tied to the erst-
while Navajo leader. Together, they discussed a plan
whereby Brown would act as broker for future business-
es locating on the Navajo Reservation, assuring that in
each instance the new Chairman would take a secret
cut. 9
MACDONALD'S ELECTION AND THE BIRTH OF "BIG BO"
On November 4, 1986, Peter MacDonald was again
elected Chairman of the Navajo Tribal Council, Chief
Executive of the largest Indian tribe of North America.
No sooner were the ballots counted than MacDonald
asked Brown for a celebratory vacation for the entire
family in the Caribbean. Brown, without resources (he
even charged his own personal expenses to the "charita-
ble" Peter MacDonald Foundation), had to borrow the
most he could from a bank: $20,000. Even at that, he
feared that a Caribbean vacation could drive him fur-
ther into debt. After all, the promise of future Navajo
rewards was still just that, a promise. Brown's friend
Tom Tracy, a wealthy Phoenix businessman, knew of a
house in Hawaii that could be used at no charge. So
Brown proposed Hawaii and the Chairman-elect, his
wife Wanda and daughter Hope accepted the Pacific al-
ternative. Brown paid for all the costs: airfare, rental
car, golf fees, lavish meals, and the hotels on an ex-
tended inter-island hop, almost $10,000 in total. 10
Yet such an expense could not be justified for a frolic
alone: this was a working vacation. Potential suitors
184
played court on the 9th Tee of the WaiKoloa Golf Club.
Chief among them was Wayne James, Tom Tracy's ac-
countant and general troubleshooter, accompanied by a
representative of the Maverick Beef Company. Their
plan was to locate a foundation herd of Solaire Maver-
ick cattle — a special breed that produces a leaner "natu-
ral light" beef— on the Navajo Reservation, with ex-
tended range. The underlying scheme, however, was
that the Chairman-elect and Brown would purchase
Maverick stock at an insider price before the public an-
nouncement of the deal with the Navajos and quickly
unload the stock at a big profit once it was publicly an-
nounced that the fledgling Maverick company entered
into a major contract with the largest tribe in North
America. The problem with the plan was that Maverick
wanted a significant long-term business commitment
from the tribe; MacDonald and Brown wanted a fast
profit. x x
The Maverick scheme, nonetheless, did not prove
completely fruitless. It occurred to Brown, who had
sometimes dabbled unsuccessfully in real estate, that
the cattle could come with additional land to graze —
and additional profit to him and MacDonald. 12
For years, the Big Boquillas Ranch near Seligman,
Arizona, in the northwest corner of the state, was for
sale. Tenneco, the owner of the land, had been desper-
ate since the early 1980's to unload the more than
491,000 acres. The market was declining and whatever
value the land had was in its vastness; otherwise it was
mostly semi-arid desert without any proven mineral re-
sources of worth. In 1984 Tenneco publicly advertised
the land in the Wall Street Journal for $25 million, or
about $50 an acre. By the end of 1986, Tenneco had
three possible buyers, all in the range of $18 to $25 mil-
lion. Despite agreeing to various purchase options, Ten-
neco was unable to consummate any deal. Tenneco offi-
cials admitted that they would have been pleased to sell
the entire property for $18 million in cash. 13
Playing golf together in Hawaii, Brown mentioned
the "Big Bo" Ranch. He knew of MacDonald's interest
in land (and money): How would the Navajo Nation like
to purchase this vast space? The Chairman-elect in-
structed Brown to find out the terms. But MacDonald
needed money now. 14
185
Fresh from Hawaii, MacDonald and his wife Wanda
traveled with John Paddock on an all-expense paid
mini-vacation to Caesar's Palace in Las Vegas. Paddock
was a major Arizona construction contractor who had
been active on the reservation during MacDonald's pre-
vious regime. In fact, Paddock had already given Mac-
Donald free use of his plane and other gifts during the
campaign. Now, MacDonald asked John Paddock for
$35,000 in cash. A $35,000 further investment for future
business seemed in order, but Paddock insisted on a
note. Loaning the money also seemed a prudent protec-
tion, though Paddock soon came to realize that a "loan"
for MacDonald and his aides existed solely on paper.
Paddock's loan was never repaid per se: only in business
contracts with the Navajo government. 15 And MacDon-
ald and his associates continued throughout his term in
office to willingly use "loans" to mask their extortion-
ate demands, if it appeared to make the payor feel any
better. 16
Meanwhile, the Big Bo Ranch was under one of its
many failed options. In the beginning of January,
Brown met with Mel Jans of Tenneco. Jans informed
Brown of Tenneco's $25 million asking price and the
other terms of purchase, with a commission to Brown of
$750,000 for brokering the deal. 1 7
Brown hurried back to Window Rock, Arizona, capital
of the Navajo Nation, where MacDonald was awaiting
his inauguration on January 13, 1987. Brown and Mac-
Donald discussed the real terms of the transaction:
Brown would enter a secret partnership to buy the
ranch with Tom Tracy, who had the financial state-
ments to be considered a bona fide purchaser, while
Tracy forming a dummy corporation would be repre-
sented as the only true purchaser. Tracy's dummy com-
pany would buy the ranch, mark up the price and then
sell it in a quick sale or "land flip" to the Navajos for a
substantial profit. MacDonald smiled, "I assume I'll be
taken care of." No specific terms of payment were dis-
cussed since a final profit for the three conspirators had
not been fixed, but it was agreed that MacDonald cer-
tainly would be fully paid. For his part, MacDonald as-
sured Brown that he would push the transaction
through the Navajo bureaucracy. Always making sure
to keep his own hand invisible, MacDonald instructed
Brown on all the necessary steps to take. 1 8
186
Brown booked a room at the Gallup Holiday Inn near
Window Rock until the Inaugural — after all, he provid-
ed (free of charge) MacDonald's limousine that would
head the parade. And within days the next he heard
from the Chairman-elect was whether the Big Bo deal
was proceeding as planned. There was nothing new in
such a short time, but MacDonald had a "request." He
needed $25,000 immediately because the United New
Mexico Bank wanted repayment on the loan. MacDon-
ald also asked Brown for a brand-new BMW. Nothing
but the best, MacDonald instructed Brown: a grey or
black, four-door sedan, top-of-the-line, Model 735i, L-4
series worth more than $55,000, with all the extras in-
cluding air-conditioning, stereo, leather upholstery and
radar detector. 19
Brown turned to Tracy. He promised Tracy that Mac-
Donald would push the flip-sale of the Big Bo Ranch
through the Navajo government, but in return wanted a
share of the profits. Although he had arrived at no spe-
cific agreement with MacDonald, Brown told Tracy that
MacDonald insisted that the profits be split three ways:
one-third MacDonald, one-third Brown, and one-third
Tracy. Tracy, even though he was the one putting up all
the initial money, agreed. After all, Brown was entitled
to one-third by bringing MacDonald, and MacDonald in
turn was due another third for bringing the unquestion-
ing purchaser who would enrich them all. Risking
$100,000 for an option was worth the almost certain
millions in profits to Tracy. And Brown also told Tracy
that MacDonald required $25,000 up front for his loan
at the United New Mexico Bank, and a new BMW to
demonstrate their further good faith to the incoming
Chairman. 20
Tracy did not hesitate, provided MacDonald got all of
the $25,000 and Tracy could make sure MacDonald
knew it came from Tracy. Distrust ran high between
Tracy and Brown and their various deals through the
years had only assured each of them of the other's over-
riding dishonesty. Tracy decided to wire transfer the
funds directly to MacDonald's bank account. 21
Brown told MacDonald of the impending wire trans-
fer. MacDonald, who by now was the duly inaugurated
Chairman, then authorized Vice President Lonnie Ham-
ilton of the United New Mexico Bank to arrange for the
wire transfer to pay down his note. Brown went to meet
187
Hamilton to obtain the account details and confirm the
transfer. And Tracy subsequently called Hamilton to
check Brown's description of MacDonald's account in-
formation. Four days after Tracy sent his letter of sale
to the Navajo Nation and the Big Bo deal was proceed-
ing as planned, he wired the $25,000 to Peter MacDon-
ald's account at the United New Mexico Bank. The
payoff was simply entered in Tracy's books as a tax-de-
ductible business expense of the Big Boquillas transac-
tion. 22
In the meantime, Brown searched for MacDonald's
BMW. Tracy agreed to help again and sent Wayne
James with Brown to lease the car. Camelback Porsche/
Audi/BMW in Phoenix had the best deal: everything
the Chairman specified, except it was a 1986 model, not
a 1987. MacDonald signed the lease agreement, Tracy
made the $3,000 downpayment and the BMW was deliv-
ered to the Chairman's house in Flagstaff. MacDonald
did not object to the lease, provided Brown made the
payments, and in the coming months MacDonald called
Brown to regularly remind him of the monthly $813 in-
stallments. The Chairman did object to one thing,
though. He did not like the car, he told Brown; it was a
1986 model and he wanted a 1987. 23
Tracy's letter to the Navajo Nation had set a sale
price of $33.4 million. Since Brown and Tracy had final-
ly decided on a markup of over $7 million, in early
March, 1987, Brown and the Chairman met at Window
Rock to set MacDonald's precise share of the profits,
too. 24
Brown was in a quandary. If he did not promise Mac-
Donald one-third, MacDonald might find out from
Tracy. And if he agreed to give MacDonald one-third, he
would get less than what he had been expecting out of
the deal. He decided to be truthful to MacDonald, in a
fashion: MacDonald would get one-third of the profits
but since, Brown said, Tracy owed him $850,000 from a
prior business deal, MacDonald's third would be less the
$850,000, and net of taxes. MacDonald agreed. He was
hardly in a favorable negotiating position to argue oyer
paying taxes on bribes. But as soon as the Navajos
made the first downpayment on the Ranch (MacDonald
had instructed Brown in every step to follow with the
Navajo bureaucracy, while Brown met little resistance)
and Brown received his first $50,000, MacDonald asked
188
for $5,000 in cash. Brown deposited the $50,000 and
wrote a check to cash, handing MacDonald an envelope
of fifty $100 bills in early June, 1987. 25
macdonald's official program
At his Inaugural, MacDonald assumed office with a
grandiose plan of economic development and Navajo re-
juvenation. As the leading Indian politician in the coun-
try, his Nation would be a "magnet for free enterprise,"
achieving full sovereignty by economic self-sufficiency
and growth. And as Chairman, Peter MacDonald would
be the bright star to attract the country's powerful poli-
ticians and largest corporations to the Navajo Reserva-
tion. It would be nothing less than "a new spring." 26
To meet the powerful, MacDonald designed a com-
plete renovation of the tribal government offices, with
his executive suite as the crowning capstone. Solid ma-
hogany paneling, gold-plated toilet fixtures and tile
with turquoise inlay — nothing was too trivial. At the
same time, the work rewarded the faithful: John Pad-
dock was named construction manager, Pat Chee Miller
general contractor and Johnny Donaldson mechanical
subcontractor on the more than $600,000 project. 27
The office was not alone. While MacDonald had a
house in Flagstaff, he sought another home at Window
Rock. He turned to Larry Ward, the tribe's insurance
broker during MacDonald's previous administration,
who owned a small house and land in St. Michaels, ad-
jacent to Window Rock. Ward agreed to lease it to Mac-
Donald for a minimal rent. But MacDonald insisted vast
improvements be made to convert Ward's house into a
luxury home: master bedroom suite, deck with Jacuzzi
tub, exercise room, wet bar, expanded living room with
new fireplaces and French doors. The house doubled in
size and value. Ward subsequently brokered the insur-
ance contract for the Navajo Nation at an annual fee of
$100,000. 28
To make the improvements, Ward asked Johnny Don-
aldson, his friend and a local non-Navajo contractor.
Donaldson agreed to make the improvements, if he
could purchase the property after MacDonald's adminis-
tration without the added value of the renovation and if
Ward would help him get contracts from the Navajo
Nation in return. Through MacDonald's auspices, Ward
did in fact get Donaldson special treatment and tribal
189
contracts. However, the pressure grew from MacDonald
directly to Donaldson for even more improvements,
while MacDonald's aides at the same time held out the
promise of additional tribal contracts. 29
Along with a refurbished office and a renovated cap-
ital home, the Chairman wanted private jets to fly him
wherever he wished to go. He had already accumulated
over $60,000 in free travel using Paddock's plane on call
and now he sought to have the tribe purchase its own
jets. American West Aircraft in Houston agreed to pro-
vide the Navajo Nation with demonstration flights, to
be credited to the purchase price if the planes were
bought and to be paid at an agreed upon charter rate if
the tribal government decided not to purchase them. In-
stead, MacDonald flew himself and his family on a
series of flights to Boston, centering around his daugh-
ter's commencement. Since MacDonald refused Ameri-
can West's offers to pay for some of the legs by first-
class commercial carrier, MacDonald ran up in excess of
$50,000 in charter fees— all expenses that the Navajo
government eventually paid on MacDonald's behalf.
Indeed, no matter how personal the purpose, whether a
daughter's graduation or simply to take the entire
family to Miami over New Year's for the Orange Bowl,
the Navajo Nation treasury paid the private luxury
freight. 30
And Peter MacDonald scoffed at any critics, ventur-
ing that they were simply "jealous," for his government
had "more resources than Exxon." MacDonald's justifi-
cation when questioned on the $18,000 airline cost for
the Orange Bowl trip was, "What do you want me to do,
hitch-hike?" 31
Planes, offices, cars and homes were the personal per-
quisites of Peter MacDonald's Navajo revolution. The
reservation would become a magnet for business, lifting
the Navajos out of poverty: more than 46 percent of
whom had no electricity, 54 percent no indoor plumb-
ing, and 79 percent no telephone. 32
"The Navajo Nation is one of America's last economic
frontiers," MacDonald proclaimed. "I see a wealth of op-
portunity for all of us. . . . Let us, once and for all,
share in the bounty of America!" 33
The program was anchored on attracting private en-
terprise to create jobs for the 47 percent of all Navajo
adults who were unemployed. "[W]e will start by paying
190
attention to the needs of the business world. We will
offer each serious investor a package of incentives
which will help ensure the profitability and security of
their investment," MacDonald stated. 'We will not rest
until we have identified every potential business part-
ner. We will not rest until we have studied their needs,
made them proposals and sold them on us." 34
An "economic summit" was later held to endorse
MacDonald's program to foster private business. In at-
tendance were Senators Dennis DeConcini, John
McCain, Peter Domenici, Daniel Inouye, and leaders of
the business world, among others. Support for MacDon-
ald's new vision was widespread. 35
"CANDO" was the acronym for Navajo economic de-
velopment. The Commission on Accelerating Navajo De-
velopment Opportunities was established. Shopping cen-
ters, tourist complexes, gambling halls, and most impor-
tant, the erection of the new "CANDO" office building,
symbol of the Navajo renaissance, were all envi-
sioned. 36
Pat Chee Miller was the Navajo embodiment of the
new MacDonald program. Born in poverty and raised as
a traditional Navajo of the Water's Edge Clan, Miller
had built his contracting business into one of the largest
Navajo-owned construction companies on the reserva-
tion. Unknown to the outside world, however, was the
fact that Miller's complete financial backing was con-
trolled by Franz Springer, a non-Indian construction en-
trepreneur from Albuquerque. 37
MacDonald was undoubtedly aware of Springer's
secret backing though, for when he asked Miller for a
campaign contribution in September, 1986, the $1,000
came from Springer. Similarly, the bills for the ban-
quets feting MacDonald's first year in office were all
footed by Springer, in Miller's name of course. 38
In the summer of 1988, Pat Chee Miller's bid was
pending on construction of the $2.5 million CANDO
office building. MacDonald summoned Miller to his re-
modeled executive suite in Window Rock. The two were
alone and spoke in Navajo. MacDonald said he needed
$4,000 immediately. Miller responded that $4,000 was
quite a stiff sum for him to raise. 39
Miller asked Franz Springer for the money. Embar-
rassed by MacDonald's naked demand for cash, Miller
fabricated a story to claim that the Chairman needed
191
the money for traditional Navajo prizes. Springer made
out a check to cash and gave the $4,000 to Miller. 40
The next time MacDonald was in town a week later,
Miller went to see him at his renovated St. Michaels
house. Miller was ready to honor MacDonald's
demand— he felt he had to in order to receive the
CANDO contract— except for one small problem: he al-
ready spent $1,000 out of the $4,000 on himself. None-
theless, in front of the St. Michaels house, MacDonald
got into Miller's truck. Miller handed him $3,000 in
$100 bills wrapped with a rubber band, telling MacDon-
ald that the $3,000 was "all we could spare. MacDon-
ald thanked him and put the cash in his pocket. 41
During the same period, MacDonald also visited Mil-
ler's house and admired his antique car collection, indi-
cating interest in having such a car himself. Miller pro-
ceeded to purchase a replica Ford Model A, while Roy
Cleveland, MacDonald's assistant, asked for another
$5,000 that also made its way to the Chairman. Again,
Springer was the source of funds. 42
It wasn't long before MacDonald took his new replica
Model A for a test drive around Window Rock. He was
visibly delighted. The car would be great for leading pa-
rades. Yet no sooner than MacDonald was at the con-
trols, FBI Special Agent James Elroy on behalf of the
Special Committee served a Senate subpoena on Franz
Springer. Miller worriedly explained the situation to
MacDonald, who acted shocked and agreed Miller better
not give him the car now. 43
• THE BIG BO DEAL CONTINUES
The Big Boquillas Ranch was also part of Peter Mac-
Donald's plan to develop and rejuvenate the Navajo
Nation. MacDonald cajoled the Navajo bureaucracy into
support. Indeed, the Director of Land Administration
even instructed the Navajo appraiser to raise his ap-
praisal from $25-26 million to the $33.4 million asking
price. There would be no negotiation by the Navajo
Nation to obtain the best price, for only the asking
price of Tracy and Brown assured MacDonald of his full
profit. MacDonald's firm retort to questions raised by
doubting bureaucrats was, "Screw 'em, do it
anyway." 44
MacDonald similarly extolled the virtues of "Big Bo
to the Navajo Tribal Council and in April, 1987, the
192
Council approved the purchase by a lopsided vote. On
July 6, 1987, Tracy and Brown bought the ranch for
$26.2 million. Two days later, it was sold to the Navajo
Nation for $33.4 million. 45
On July 14 MacDonald told Brown that he needed
"some gittas," Marine Corps slang for money. They met
at the Dale Robertson Golf Tournament in Oklahoma
City, where Brown in his hotel room handed MacDonald
$5,000 in $100 bills inside a plain envelope — right before
Brown took MacDonald, his family and friends on an
all-expense paid lavish trip to the Las Vegas Hilton in
celebration of their new-found fortune. MacDonald,
after all, was entitled to some three-quarters of a mil-
lion dollars, as Brown calculated his share. The transfer
would be tax-free, a fact that really irked Brown, since
he had to report everything on his own tax return, in-
cluding paying the tax on MacDonald's cut. But the ad-
verse publicity surrounding the entire Big Bo transac-
tion was greater than anticipated. Brown's intimate
role and MacDonald's almost cavalier pushing of the
deal began to surface in news accounts. The local BIA
agency and even the Navajo Attorney General wrote
critical memos. Investigations seemed inevitable. 46
On the Orange Tree Golf Course in Scottsdale, Mac-
Donald and Brown agreed that any large transfers from
Brown might be subject to considerable scrutiny. It was
simply too obvious. MacDonald therefore requested cash
payoffs in $5,000 increments, whenever needed. Mac-
Donald also felt that his phone might be tapped. So he
designated the code word "golf balls" for cash. More-
over, to distance himself even further from the payoffs,
he had his son, Peter "Rocky" MacDonald, Jr., act as
the intermediary relaying his father's requests for "golf
balls." 47
Over the next six months, Brown transferred more
than $50,000 in cash directly to Chairman Peter Mac-
Donald, and an additional $10,000 through MacDonald's
son, for a total of nearly $125,000 in payoffs before the
scheme fell apart. Brown handed over cash at Christ-
mas time when MacDonald needed "shopping ex-
penses," for his wife Wanda's birthday party, after the
Chairman was the guest on a Phoenix radio talk show,
and almost always after a game of golf with MacDonald
at Orange Tree or the Pima Country Club or dinner to-
gether at El Charro's or Avanti's. The cash was always
193
delivered in a plain envelope in ordinary bills. But the
requests subsided after MacDonald learned that a feder-
al grand jury subpoena was issued to Tom Tracy. Mac-
Donald became more guarded. 48
Even in person, the Chairman used code. During a
meeting at Phoenix's Sky Harbor Airport, MacDonald
asked Brown, "Is there a way you can get some of those
funny golf balls, that stuff, you know what I mean?" 49
Yet as the Senate investigation intensified and MacDon-
ald became more desperate, over dinner at Durant's
Restaurant in Phoenix, he decided to ask Brown for an-
other $50,000. In the guise of a new note, MacDonald
specified, to pay his lawyer and cover up the previous
$25,000 wire transfer. 50
THE CHAIRMAN'S COVER-UP
In late 1987 or early 1988, after Brown called the
Chairman with news of the Tracy subpoena, MacDonald
summoned his son and Brown to a meeting. Desperate
to cover up the paper trail of the wire transfer and
BMW lease, they met at a conference room in an office
building Brown occasionally used in downtown Phoenix.
The problem they discussed was how to make it appear
that even though the funds were wired to Chairman
MacDonald's account, they were somehow not for him.
Since MacDonald had lied to the bank about the origi-
nal purpose of the loan by stating it was related to
Peter MacDonald, Jr., there was documentary "evi-
dence" corroborating a story that he had loaned his son
$25,000. Chairman MacDonald's answer was simple: the
$25,000 wire was therefore a payment of Peter